Correlation Between ASX and JAPAN EX
Can any of the company-specific risk be diversified away by investing in both ASX and JAPAN EX 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 JAPAN EX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ASX LTD UNSPONSADR and JAPAN EX UNADR, you can compare the effects of market volatilities on ASX and JAPAN EX 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 JAPAN EX. Check out your portfolio center. Please also check ongoing floating volatility patterns of ASX and JAPAN EX.
Diversification Opportunities for ASX and JAPAN EX
Poor diversification
The 3 months correlation between ASX and JAPAN is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding ASX LTD UNSPONSADR and JAPAN EX UNADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JAPAN EX UNADR 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 LTD UNSPONSADR are associated (or correlated) with JAPAN EX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JAPAN EX UNADR has no effect on the direction of ASX i.e., ASX and JAPAN EX go up and down completely randomly.
Pair Corralation between ASX and JAPAN EX
Assuming the 90 days trading horizon ASX LTD UNSPONSADR is expected to under-perform the JAPAN EX. But the stock apears to be less risky and, when comparing its historical volatility, ASX LTD UNSPONSADR is 1.25 times less risky than JAPAN EX. The stock trades about 0.0 of its potential returns per unit of risk. The JAPAN EX UNADR is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 619.00 in JAPAN EX UNADR on November 2, 2024 and sell it today you would earn a total of 401.00 from holding JAPAN EX UNADR or generate 64.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
ASX LTD UNSPONSADR vs. JAPAN EX UNADR
Performance |
| Timeline |
| ASX LTD UNSPONSADR |
| JAPAN EX UNADR |
ASX and JAPAN EX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ASX and JAPAN EX
The main advantage of trading using opposite ASX and JAPAN EX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ASX position performs unexpectedly, JAPAN EX 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 JAPAN EX will offset losses from the drop in JAPAN EX's long position.| ASX vs. Citic Telecom International | ASX vs. Chunghwa Telecom Co | ASX vs. TELECOM ITALIA | ASX vs. GREENX METALS LTD |
| JAPAN EX vs. Inspire Medical Systems | JAPAN EX vs. Yanzhou Coal Mining | JAPAN EX vs. Advanced Medical Solutions | JAPAN EX vs. Avanos Medical |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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