Correlation Between ASX Limited and SP Global
Can any of the company-specific risk be diversified away by investing in both ASX Limited and SP Global 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 SP Global 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 SP Global, you can compare the effects of market volatilities on ASX Limited and SP Global 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 SP Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of ASX Limited and SP Global.
Diversification Opportunities for ASX Limited and SP Global
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between ASX and SPGI is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding ASX Limited ADR and SP Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SP Global 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 SP Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SP Global has no effect on the direction of ASX Limited i.e., ASX Limited and SP Global go up and down completely randomly.
Pair Corralation between ASX Limited and SP Global
Assuming the 90 days horizon ASX Limited ADR is expected to generate 1.14 times more return on investment than SP Global. However, ASX Limited is 1.14 times more volatile than SP Global. It trades about -0.07 of its potential returns per unit of risk. SP Global is currently generating about -0.09 per unit of risk. If you would invest 4,301 in ASX Limited ADR on January 20, 2024 and sell it today you would lose (264.00) from holding ASX Limited ADR or give up 6.14% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ASX Limited ADR vs. SP Global
Performance |
| Timeline |
| ASX Limited ADR |
| SP Global |
ASX Limited and SP Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ASX Limited and SP Global
The main advantage of trading using opposite ASX Limited and SP Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ASX Limited position performs unexpectedly, SP Global 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 SP Global will offset losses from the drop in SP Global's long position.| ASX Limited vs. Deutsche Boerse AG | ASX Limited vs. Japan Exchange Group | ASX Limited vs. CochLear Ltd ADR | ASX Limited vs. Wesfarmers Ltd ADR |
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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