40.85 -0.16 (-0.39%) Sell

HSBC is a falling knife, continues to bleed every investor trying to catch it

13 min read

HSBC HOLDINGS PLC (Foreign) was among the worst performers on Friday. It returned -0.39% to close at 40.85. It is currently trading -26% below it's 52 week high of 55.62.

[Themes containing HSBC]

Buy-and-Hold investors in HSBC experienced a maximum drawdown of -14.14% over the last three months. It returned -4.8% during this down trending period. There were no long signals during this period, where the short signal generated profits of +4.8% for investors.


HSBC has been outperforming the SP500 index in recent time. Over the last 2 years 11 months and 3 days, HSBC underperformed the SP500 index on 50% days. Which indicates that on days HSBC underperforms the SP500 index, it's performance is marginally worse than on the days it outperforms the SP500 index.

During the last three months HSBC was mostly loss making and delivered on average -0.07% per day. It's best return during this period (of +3.93%) was on Monday, 29 Oct, 2018. While it's worst loss in the same period (of -3.62%) was on Thursday, 6 Dec, 2018. There was initially a bearish trend during this period which started on 5 Oct, 2018 and went on till 18 Oct, 2018. The trend delivered -9.5% losses to investors. This was followed by a bullish trend that started on 29 Oct, 2018 and ended on 2 Nov, 2018. This bullish trend delivered +8.28% to investors.

On monthly basis, HSBC delivered losses in more months over the last year, than profits. HSBC delivered profits less regularly than SP500 index. HSBC was also a more risky investment than SP500 index as it's worst month in the last year, Aug 2018, returned -9.11% compared to -7.28% returned by SP500 index in Oct 2018. HSBC had a longer winning streak of losing months than SP500 index. It went down in 3 straight months (from Aug 2018 to Oct 2018) during which period it delivered -16.01%. It is interesting to note that both HSBC and SP500 index significantly outperform during months when quarterly/annual results are announced.

Money won't create success, the freedom to make it will.
-- Nelson Mandela

HSBC is becoming more volatile overall. In comparison, the SP500 index is seeing a rise in volatility. During the last three months, there was a significant surge in HSBC's volatility from 10 Sep, 2018 to 7 Dec, 2018. While there was a significant surge in the SP500 index's volatility from 10 Sep, 2018 to 29 Oct, 2018.

Advanced/professional short-term investors should note that HSBC has significant positive skewness in it's return distribution. This indicates that investors can expect HSBC to recover from drawdowns quickly. Which makes HSBC a good candidate for investing on short-term bullish trends or even counter-trends hoping for a pull-back.

Investors trading in HSBC derivatives at this moment can consider 'Bear Put Spread' options strategy to receive better risk-adjusted returns.

SP500 index has more chance of extreme outcomes than HSBC. Therefore, SP500 must receive a lower allocation than HSBC in your portfolio. SP500 index usually has shorter drawdown period than HSBC.

On a general note (since you are interested in HSBC), two instruments that deserve special mention are AYTU and TYHT. They have significantly outperformed the overall market.

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