Correlation Between London Stock and ASX
Can any of the company-specific risk be diversified away by investing in both London Stock 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 London Stock and ASX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between London Stock Exchange and ASX Limited, you can compare the effects of market volatilities on London Stock 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 London Stock with a short position of ASX. Check out your portfolio center. Please also check ongoing floating volatility patterns of London Stock and ASX.
Diversification Opportunities for London Stock and ASX
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between London and ASX is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding London Stock Exchange and ASX Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASX Limited and London Stock 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 London Stock Exchange 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 London Stock i.e., London Stock and ASX go up and down completely randomly.
Pair Corralation between London Stock and ASX
Assuming the 90 days trading horizon London Stock Exchange is expected to generate 1.04 times more return on investment than ASX. However, London Stock is 1.04 times more volatile than ASX Limited. It trades about 0.05 of its potential returns per unit of risk. ASX Limited is currently generating about 0.05 per unit of risk. If you would invest 13,300 in London Stock Exchange on September 12, 2024 and sell it today you would earn a total of 200.00 from holding London Stock Exchange or generate 1.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
London Stock Exchange vs. ASX Limited
Performance |
| Timeline |
| London Stock Exchange |
| ASX Limited |
London Stock and ASX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with London Stock and ASX
The main advantage of trading using opposite London Stock and ASX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if London Stock 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.| London Stock vs. SMA Solar Technology | London Stock vs. Highlight Communications AG | London Stock vs. Ribbon Communications | London Stock vs. Singapore Telecommunications 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 Stocks Directory module to find actively traded stocks across global markets.
Other Complementary Tools
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios | |
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets |