Correlation Between Ayala Land and HSBC Holdings

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

By analyzing existing cross correlation between Ayala Land and HSBC Holdings PLC, you can compare the effects of market volatilities on Ayala Land and HSBC Holdings 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 Ayala Land with a short position of HSBC Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ayala Land and HSBC Holdings.

Diversification Opportunities for Ayala Land and HSBC Holdings

0.37

Correlation Coefficient

Ayala Land  HSBC Holdings

Weak diversification

The 3 months correlation between Ayala and HSBC is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Ayala Land and HSBC Holdings PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HSBC Holdings PLC and Ayala Land 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 Ayala Land are associated (or correlated) with HSBC Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HSBC Holdings PLC has no effect on the direction of Ayala Land i.e., Ayala Land and HSBC Holdings go up and down completely randomly.

Pair Corralation between Ayala Land and HSBC Holdings

If you would invest  788.00  in HSBC Holdings PLC on February 5, 2024 and sell it today you would earn a total of  104.00  from holding HSBC Holdings PLC or generate 13.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	4.55%
Values	Daily Returns

Ayala Land  vs.  HSBC Holdings PLC

Ayala Land

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ayala Land has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Ayala Land is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

HSBC Holdings PLC

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HSBC Holdings PLC are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, HSBC Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ayala Land and HSBC Holdings

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

The idea behind Ayala Land and HSBC Holdings PLC 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..