Correlation Between SP Global and ASX Limited
Can any of the company-specific risk be diversified away by investing in both SP Global and ASX Limited 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 SP Global and ASX Limited into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SP Global and ASX Limited ADR, you can compare the effects of market volatilities on SP Global and ASX Limited 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 SP Global with a short position of ASX Limited. Check out your portfolio center. Please also check ongoing floating volatility patterns of SP Global and ASX Limited.
Diversification Opportunities for SP Global and ASX Limited
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between SPGI and ASX is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding SP Global and ASX Limited ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASX Limited ADR and SP Global 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 SP Global are associated (or correlated) with ASX Limited. 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 ADR has no effect on the direction of SP Global i.e., SP Global and ASX Limited go up and down completely randomly.
Pair Corralation between SP Global and ASX Limited
Given the investment horizon of 90 days SP Global is expected to generate 1.03 times more return on investment than ASX Limited. However, SP Global is 1.03 times more volatile than ASX Limited ADR. It trades about -0.14 of its potential returns per unit of risk. ASX Limited ADR is currently generating about -0.48 per unit of risk. If you would invest 42,603 in SP Global on January 20, 2024 and sell it today you would lose (1,266) from holding SP Global or give up 2.97% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SP Global vs. ASX Limited ADR
Performance |
| Timeline |
| SP Global |
| ASX Limited ADR |
SP Global and ASX Limited Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SP Global and ASX Limited
The main advantage of trading using opposite SP Global and ASX Limited positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SP Global position performs unexpectedly, ASX Limited 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 Limited will offset losses from the drop in ASX Limited's long position.| SP Global vs. MSCI Inc | SP Global vs. Nasdaq Inc | SP Global vs. Intercontinental Exchange | SP Global 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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