Correlation Between Hong Kong and ASX
Can any of the company-specific risk be diversified away by investing in both Hong Kong and ASX 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 Hong Kong and ASX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hong Kong Exchanges and ASX Limited, you can compare the effects of market volatilities on Hong Kong and ASX 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 Hong Kong with a short position of ASX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hong Kong and ASX.
Diversification Opportunities for Hong Kong and ASX
Very weak diversification
The 3 months correlation between Hong and ASX is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Hong Kong Exchanges and ASX Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASX Limited and Hong Kong 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 Hong Kong Exchanges are associated (or correlated) with ASX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASX Limited has no effect on the direction of Hong Kong i.e., Hong Kong and ASX go up and down completely randomly.
Pair Corralation between Hong Kong and ASX
Assuming the 90 days trading horizon Hong Kong Exchanges is expected to generate 1.78 times more return on investment than ASX. However, Hong Kong is 1.78 times more volatile than ASX Limited. It trades about 0.06 of its potential returns per unit of risk. ASX Limited is currently generating about 0.05 per unit of risk. 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 |
Hong Kong Exchanges vs. ASX Limited
Performance |
| Timeline |
| Hong Kong Exchanges |
| ASX Limited |
Hong Kong and ASX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hong Kong and ASX
The main advantage of trading using opposite Hong Kong and ASX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hong Kong position performs unexpectedly, ASX 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 ASX will offset losses from the drop in ASX's long position.| Hong Kong vs. Ares Management Corp | Hong Kong vs. Jupiter Fund Management | Hong Kong vs. Brockhaus Capital Management | Hong Kong vs. AGF Management Limited |
| ASX vs. Iridium Communications | ASX vs. Singapore Telecommunications Limited | ASX vs. Entravision Communications | ASX vs. Charter Communications |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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