Correlation Between JAPAN EX and ASX
Can any of the company-specific risk be diversified away by investing in both JAPAN EX 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 JAPAN EX and ASX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between JAPAN EX UNADR and ASX LTD UNSPONSADR, you can compare the effects of market volatilities on JAPAN EX 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 JAPAN EX with a short position of ASX. Check out your portfolio center. Please also check ongoing floating volatility patterns of JAPAN EX and ASX.
Diversification Opportunities for JAPAN EX and ASX
Poor diversification
The 3 months correlation between JAPAN and ASX is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding JAPAN EX UNADR and ASX LTD UNSPONSADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASX LTD UNSPONSADR and JAPAN EX 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 JAPAN EX UNADR 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 LTD UNSPONSADR has no effect on the direction of JAPAN EX i.e., JAPAN EX and ASX go up and down completely randomly.
Pair Corralation between JAPAN EX and ASX
Assuming the 90 days trading horizon JAPAN EX UNADR is expected to generate 1.25 times more return on investment than ASX. However, JAPAN EX is 1.25 times more volatile than ASX LTD UNSPONSADR. It trades about 0.07 of its potential returns per unit of risk. ASX LTD UNSPONSADR is currently generating about 0.0 per unit of risk. 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 |
JAPAN EX UNADR vs. ASX LTD UNSPONSADR
Performance |
| Timeline |
| JAPAN EX UNADR |
| ASX LTD UNSPONSADR |
JAPAN EX and ASX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JAPAN EX and ASX
The main advantage of trading using opposite JAPAN EX and ASX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JAPAN EX 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.| JAPAN EX vs. Inspire Medical Systems | JAPAN EX vs. Yanzhou Coal Mining | JAPAN EX vs. Advanced Medical Solutions | JAPAN EX vs. Avanos Medical |
| ASX vs. Citic Telecom International | ASX vs. Chunghwa Telecom Co | ASX vs. TELECOM ITALIA | ASX vs. GREENX METALS LTD |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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