Correlation Between ASX and Hong Kong
Can any of the company-specific risk be diversified away by investing in both ASX and Hong Kong 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 Hong Kong into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ASX Limited and Hong Kong Exchanges, you can compare the effects of market volatilities on ASX and Hong Kong 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 Hong Kong. Check out your portfolio center. Please also check ongoing floating volatility patterns of ASX and Hong Kong.
Diversification Opportunities for ASX and Hong Kong
Very weak diversification
The 3 months correlation between ASX and Hong is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding ASX Limited and Hong Kong Exchanges in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hong Kong Exchanges 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 Hong Kong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hong Kong Exchanges has no effect on the direction of ASX i.e., ASX and Hong Kong go up and down completely randomly.
Pair Corralation between ASX and Hong Kong
Assuming the 90 days horizon ASX is expected to generate 1.98 times less return on investment than Hong Kong. But when comparing it to its historical volatility, ASX Limited is 1.78 times less risky than Hong Kong. It trades about 0.05 of its potential returns per unit of risk. Hong Kong Exchanges is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 3,849 in Hong Kong Exchanges on September 12, 2024 and sell it today you would earn a total of 101.00 from holding Hong Kong Exchanges or generate 2.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
ASX Limited vs. Hong Kong Exchanges
Performance |
| Timeline |
| ASX Limited |
| Hong Kong Exchanges |
ASX and Hong Kong Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ASX and Hong Kong
The main advantage of trading using opposite ASX and Hong Kong positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ASX position performs unexpectedly, Hong Kong 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 Hong Kong will offset losses from the drop in Hong Kong's long position.| ASX vs. Iridium Communications | ASX vs. Singapore Telecommunications Limited | ASX vs. Entravision Communications | ASX vs. Charter Communications |
| Hong Kong vs. Ares Management Corp | Hong Kong vs. Jupiter Fund Management | Hong Kong vs. Brockhaus Capital Management | Hong Kong vs. AGF Management Limited |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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