Correlation Between Amazon and HSBC Holdings

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Can any of the company-specific risk be diversified away by investing in both Amazon 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 Amazon and HSBC Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and HSBC Holdings PLC, you can compare the effects of market volatilities on Amazon 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 Amazon with a short position of HSBC Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and HSBC Holdings.

Diversification Opportunities for Amazon and HSBC Holdings

0.11
  Correlation Coefficient

Average diversification

The 3 months correlation between Amazon and HSBC Holdings is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc 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 Amazon 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 Amazon Inc 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 Amazon i.e., Amazon and HSBC Holdings go up and down completely randomly.

Pair Corralation between Amazon and HSBC Holdings

Given the investment horizon of 90 days Amazon Inc is expected to under-perform the HSBC Holdings. In addition to that, Amazon is 1.32 times more volatile than HSBC Holdings PLC. It trades about -0.04 of its total potential returns per unit of risk. HSBC Holdings PLC is currently generating about 0.03 per unit of volatility. If you would invest  2,466  in HSBC Holdings PLC on September 8, 2022 and sell it today you would earn a total of  541.00  from holding HSBC Holdings PLC or generate 21.94% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Amazon Inc  vs.  HSBC Holdings PLC

 Performance (%) 
       Timeline  
Amazon Inc 
Amazon Performance
0 of 100
Over the last 90 days Amazon Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2023. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Amazon Price Channel

HSBC Holdings PLC 
HSBC Holdings Performance
0 of 100
Over the last 90 days HSBC Holdings PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, HSBC Holdings is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

HSBC Holdings Price Channel

Amazon and HSBC Holdings Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Amazon and HSBC Holdings

The main advantage of trading using opposite Amazon and HSBC Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon 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.
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The idea behind Amazon Inc 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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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 Commodity Channel Index module to use Commodity Channel Index to analyze current equity momentum.

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