Correlation Between ASX Limited and Euronext
Can any of the company-specific risk be diversified away by investing in both ASX Limited and Euronext 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 Limited and Euronext into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ASX Limited ADR and Euronext NV, you can compare the effects of market volatilities on ASX Limited and Euronext 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 Limited with a short position of Euronext. Check out your portfolio center. Please also check ongoing floating volatility patterns of ASX Limited and Euronext.
Diversification Opportunities for ASX Limited and Euronext
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between ASX and Euronext is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding ASX Limited ADR and Euronext NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Euronext NV and ASX Limited 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 ADR are associated (or correlated) with Euronext. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Euronext NV has no effect on the direction of ASX Limited i.e., ASX Limited and Euronext go up and down completely randomly.
Pair Corralation between ASX Limited and Euronext
Assuming the 90 days horizon ASX Limited ADR is expected to under-perform the Euronext. In addition to that, ASX Limited is 1.11 times more volatile than Euronext NV. It trades about -0.15 of its total potential returns per unit of risk. Euronext NV is currently generating about -0.15 per unit of volatility. If you would invest 9,317 in Euronext NV on January 26, 2024 and sell it today you would lose (272.00) from holding Euronext NV or give up 2.92% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ASX Limited ADR vs. Euronext NV
Performance |
| Timeline |
| ASX Limited ADR |
| Euronext NV |
ASX Limited and Euronext Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ASX Limited and Euronext
The main advantage of trading using opposite ASX Limited and Euronext positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ASX Limited position performs unexpectedly, Euronext 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 Euronext will offset losses from the drop in Euronext's long position.| ASX Limited vs. TMX Group Limited | ASX Limited vs. Otc Markets Group | ASX Limited vs. Morningstar | ASX Limited vs. CME Group |
| Euronext vs. TMX Group Limited | Euronext vs. Otc Markets Group | Euronext vs. Morningstar | Euronext vs. CME Group |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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