Correlation Between ASX and TMX GROUP
Can any of the company-specific risk be diversified away by investing in both ASX and TMX GROUP 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 ASX and TMX GROUP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ASX Limited and TMX GROUP LTD, you can compare the effects of market volatilities on ASX and TMX GROUP 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 ASX with a short position of TMX GROUP. Check out your portfolio center. Please also check ongoing floating volatility patterns of ASX and TMX GROUP.
Diversification Opportunities for ASX and TMX GROUP
Very weak diversification
The 3 months correlation between ASX and TMX is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding ASX Limited and TMX GROUP LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TMX GROUP LTD and ASX 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 ASX Limited are associated (or correlated) with TMX GROUP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TMX GROUP LTD has no effect on the direction of ASX i.e., ASX and TMX GROUP go up and down completely randomly.
Pair Corralation between ASX and TMX GROUP
Assuming the 90 days horizon ASX Limited is expected to generate 0.71 times more return on investment than TMX GROUP. However, ASX Limited is 1.41 times less risky than TMX GROUP. It trades about 0.05 of its potential returns per unit of risk. TMX GROUP LTD is currently generating about -0.02 per unit of risk. If you would invest 3,980 in ASX Limited on September 12, 2024 and sell it today you would earn a total of 60.00 from holding ASX Limited or generate 1.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ASX Limited vs. TMX GROUP LTD
Performance |
| Timeline |
| ASX Limited |
| TMX GROUP LTD |
ASX and TMX GROUP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ASX and TMX GROUP
The main advantage of trading using opposite ASX and TMX GROUP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ASX position performs unexpectedly, TMX GROUP 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 TMX GROUP will offset losses from the drop in TMX GROUP's long position.| ASX vs. Iridium Communications | ASX vs. Singapore Telecommunications Limited | ASX vs. Entravision Communications | ASX vs. Charter Communications |
| TMX GROUP vs. LION ONE METALS | TMX GROUP vs. SERI INDUSTRIAL EO | TMX GROUP vs. GRIFFIN MINING LTD | TMX GROUP vs. MCEWEN MINING INC |
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 the Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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