Correlation Between HSBC Holdings and Credit Suisse

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Can any of the company-specific risk be diversified away by investing in both HSBC Holdings and Credit Suisse 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 Credit Suisse 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 Credit Suisse Group, you can compare the effects of market volatilities on HSBC Holdings and Credit Suisse 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 Credit Suisse. Check out your portfolio center. Please also check ongoing floating volatility patterns of HSBC Holdings and Credit Suisse.

Diversification Opportunities for HSBC Holdings and Credit Suisse

0.27
  Correlation Coefficient

Modest diversification

The 3 months correlation between HSBC and Credit is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding HSBC Holdings PLC and Credit Suisse Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Credit Suisse Group 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 Credit Suisse. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Credit Suisse Group has no effect on the direction of HSBC Holdings i.e., HSBC Holdings and Credit Suisse go up and down completely randomly.

Pair Corralation between HSBC Holdings and Credit Suisse

If you would invest  3,684  in HSBC Holdings PLC on December 29, 2023 and sell it today you would earn a total of  215.00  from holding HSBC Holdings PLC or generate 5.84% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy4.55%
ValuesDaily Returns

HSBC Holdings PLC  vs.  Credit Suisse Group

 Performance 
       Timeline  
HSBC Holdings PLC 

Risk-Adjusted Performance

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Low
 
High
Very Weak
Over the last 90 days HSBC Holdings PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, HSBC Holdings is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.
Credit Suisse Group 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Credit Suisse Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Credit Suisse is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

HSBC Holdings and Credit Suisse Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with HSBC Holdings and Credit Suisse

The main advantage of trading using opposite HSBC Holdings and Credit Suisse positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HSBC Holdings position performs unexpectedly, Credit Suisse 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 Credit Suisse will offset losses from the drop in Credit Suisse's long position.
The idea behind HSBC Holdings PLC and Credit Suisse Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.

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