Correlation Between WisdomTree Aluminium and HSBC APAC

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

By analyzing existing cross correlation between WisdomTree Aluminium 2x and HSBC APAC EX, you can compare the effects of market volatilities on WisdomTree Aluminium and HSBC APAC 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 WisdomTree Aluminium with a short position of HSBC APAC. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Aluminium and HSBC APAC.

Diversification Opportunities for WisdomTree Aluminium and HSBC APAC

0.91

Correlation Coefficient

WisdomTree Aluminium  HSBC APAC

Almost no diversification

The 3 months correlation between WisdomTree and HSBC is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Aluminium 2x and HSBC APAC EX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HSBC APAC EX and WisdomTree Aluminium 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 WisdomTree Aluminium 2x are associated (or correlated) with HSBC APAC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HSBC APAC EX has no effect on the direction of WisdomTree Aluminium i.e., WisdomTree Aluminium and HSBC APAC go up and down completely randomly.

Pair Corralation between WisdomTree Aluminium and HSBC APAC

Assuming the 90 days trading horizon WisdomTree Aluminium 2x is expected to generate 2.18 times more return on investment than HSBC APAC. However, WisdomTree Aluminium is 2.18 times more volatile than HSBC APAC EX. It trades about 0.18 of its potential returns per unit of risk. HSBC APAC EX is currently generating about 0.33 per unit of risk. If you would invest  176.00  in WisdomTree Aluminium 2x on April 22, 2025 and sell it today you would earn a total of  41.00  from holding WisdomTree Aluminium 2x or generate 23.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

WisdomTree Aluminium 2x  vs.  HSBC APAC EX

WisdomTree Aluminium

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Aluminium 2x are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, WisdomTree Aluminium unveiled solid returns over the last few months and may actually be approaching a breakup point.

HSBC APAC EX

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in HSBC APAC EX are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, HSBC APAC unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with WisdomTree Aluminium and HSBC APAC

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

The idea behind WisdomTree Aluminium 2x and HSBC APAC EX 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.