Correlation Between HSBC Holdings and Barclays PLC
Can any of the company-specific risk be diversified away by investing in both HSBC Holdings and Barclays PLC at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining HSBC Holdings and Barclays PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HSBC Holdings PLC and Barclays PLC ADR, you can compare the effects of market volatilities on HSBC Holdings and Barclays PLC and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in HSBC Holdings with a short position of Barclays PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of HSBC Holdings and Barclays PLC.
Diversification Opportunities for HSBC Holdings and Barclays PLC
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between HSBC and Barclays is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding HSBC Holdings PLC and Barclays PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barclays PLC ADR and HSBC Holdings is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on HSBC Holdings PLC are associated (or correlated) with Barclays PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barclays PLC ADR has no effect on the direction of HSBC Holdings i.e., HSBC Holdings and Barclays PLC go up and down completely randomly.
Pair Corralation between HSBC Holdings and Barclays PLC
Given the investment horizon of 90 days HSBC Holdings is expected to generate 1.13 times less return on investment than Barclays PLC. But when comparing it to its historical volatility, HSBC Holdings PLC is 1.57 times less risky than Barclays PLC. It trades about 0.05 of its potential returns per unit of risk. Barclays PLC ADR is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 795.00 in Barclays PLC ADR on January 21, 2024 and sell it today you would earn a total of 140.00 from holding Barclays PLC ADR or generate 17.61% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
HSBC Holdings PLC vs. Barclays PLC ADR
Performance |
Timeline |
HSBC Holdings PLC |
Barclays PLC ADR |
HSBC Holdings and Barclays PLC Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with HSBC Holdings and Barclays PLC
The main advantage of trading using opposite HSBC Holdings and Barclays PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HSBC Holdings position performs unexpectedly, Barclays PLC can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Barclays PLC will offset losses from the drop in Barclays PLC's long position.HSBC Holdings vs. ING Group NV | HSBC Holdings vs. Natwest Group PLC | HSBC Holdings vs. Banco Santander SA | HSBC Holdings vs. UBS Group AG |
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Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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