Correlation Between ASX and Intercontinental
Can any of the company-specific risk be diversified away by investing in both ASX and Intercontinental 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 Intercontinental into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ASX Limited and Intercontinental Exchange, you can compare the effects of market volatilities on ASX and Intercontinental 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 Intercontinental. Check out your portfolio center. Please also check ongoing floating volatility patterns of ASX and Intercontinental.
Diversification Opportunities for ASX and Intercontinental
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ASX and Intercontinental is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding ASX Limited and Intercontinental Exchange in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intercontinental Exchange 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 Intercontinental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intercontinental Exchange has no effect on the direction of ASX i.e., ASX and Intercontinental go up and down completely randomly.
Pair Corralation between ASX and Intercontinental
Assuming the 90 days horizon ASX Limited is expected to generate 1.52 times more return on investment than Intercontinental. However, ASX is 1.52 times more volatile than Intercontinental Exchange. It trades about 0.05 of its potential returns per unit of risk. Intercontinental Exchange is currently generating about 0.07 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 | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ASX Limited vs. Intercontinental Exchange
Performance |
| Timeline |
| ASX Limited |
| Intercontinental Exchange |
ASX and Intercontinental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ASX and Intercontinental
The main advantage of trading using opposite ASX and Intercontinental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ASX position performs unexpectedly, Intercontinental 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 Intercontinental will offset losses from the drop in Intercontinental's long position.| ASX vs. Iridium Communications | ASX vs. Singapore Telecommunications Limited | ASX vs. Entravision Communications | ASX vs. Charter Communications |
| Intercontinental vs. Bumrungrad Hospital Public | Intercontinental vs. Virtus Investment Partners | Intercontinental vs. DiamondRock Hospitality | Intercontinental vs. YOOMA WELLNESS 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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