Correlation Between Swiss Leader and HSBC MSCI

Can any of the company-specific risk be diversified away by investing in both Swiss Leader and HSBC MSCI 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 Swiss Leader and HSBC MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Swiss Leader Price and HSBC MSCI Taiwan, you can compare the effects of market volatilities on Swiss Leader and HSBC MSCI 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 Swiss Leader with a short position of HSBC MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Swiss Leader and HSBC MSCI.

Diversification Opportunities for Swiss Leader and HSBC MSCI

-0.4

Correlation Coefficient

Swiss Leader  HSBC MSCI

Very good diversification

The 3 months correlation between Swiss and HSBC is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Swiss Leader Price and HSBC MSCI Taiwan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HSBC MSCI Taiwan and Swiss Leader 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 Swiss Leader Price are associated (or correlated) with HSBC MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HSBC MSCI Taiwan has no effect on the direction of Swiss Leader i.e., Swiss Leader and HSBC MSCI go up and down completely randomly.

Pair Corralation between Swiss Leader and HSBC MSCI

Assuming the 90 days trading horizon Swiss Leader Price is expected to under-perform the HSBC MSCI. But the index apears to be less risky and, when comparing its historical volatility, Swiss Leader Price is 1.78 times less risky than HSBC MSCI. The index trades about -0.03 of its potential returns per unit of risk. The HSBC MSCI Taiwan is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  8,087  in HSBC MSCI Taiwan on May 18, 2025 and sell it today you would earn a total of  1,157  from holding HSBC MSCI Taiwan or generate 14.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Swiss Leader Price  vs.  HSBC MSCI Taiwan

Pair Trading with Swiss Leader and HSBC MSCI

The main advantage of trading using opposite Swiss Leader and HSBC MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Swiss Leader position performs unexpectedly, HSBC MSCI 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 HSBC MSCI will offset losses from the drop in HSBC MSCI's long position.

The idea behind Swiss Leader Price and HSBC MSCI Taiwan 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.

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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .