Correlation Between BlueRush and HSBC Holdings

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

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

Diversification Opportunities for BlueRush and HSBC Holdings

-0.36

Correlation Coefficient

BlueRush  HSBC Holdings

Very good diversification

The 3 months correlation between BlueRush and HSBC is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding BlueRush 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 BlueRush 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 BlueRush 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 BlueRush i.e., BlueRush and HSBC Holdings go up and down completely randomly.

Pair Corralation between BlueRush and HSBC Holdings

Assuming the 90 days horizon BlueRush is expected to generate 9.3 times more return on investment than HSBC Holdings. However, BlueRush is 9.3 times more volatile than HSBC Holdings PLC. It trades about 0.01 of its potential returns per unit of risk. HSBC Holdings PLC is currently generating about 0.06 per unit of risk. If you would invest  17.00  in BlueRush on February 16, 2024 and sell it today you would lose (16.38) from holding BlueRush or give up 96.35% of portfolio value over 90 days.

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

BlueRush  vs.  HSBC Holdings PLC

BlueRush

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BlueRush has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

HSBC Holdings PLC

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HSBC Holdings PLC are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental drivers, HSBC Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BlueRush and HSBC Holdings

The main advantage of trading using opposite BlueRush and HSBC Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BlueRush 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 BlueRush 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.