Correlation Between ASX and Hong Kong
Can any of the company-specific risk be diversified away by investing in both ASX and Hong Kong 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 and Hong Kong into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ASX Limited and Hong Kong Exchanges, you can compare the effects of market volatilities on ASX and Hong Kong 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 with a short position of Hong Kong. Check out your portfolio center. Please also check ongoing floating volatility patterns of ASX and Hong Kong.
Diversification Opportunities for ASX and Hong Kong
Average diversification
The 3 months correlation between ASX and Hong is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding ASX Limited and Hong Kong Exchanges in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hong Kong Exchanges and ASX 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 are associated (or correlated) with Hong Kong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hong Kong Exchanges has no effect on the direction of ASX i.e., ASX and Hong Kong go up and down completely randomly.
Pair Corralation between ASX and Hong Kong
Assuming the 90 days horizon ASX Limited is expected to under-perform the Hong Kong. But the pink sheet apears to be less risky and, when comparing its historical volatility, ASX Limited is 1.87 times less risky than Hong Kong. The pink sheet trades about -0.22 of its potential returns per unit of risk. The Hong Kong Exchanges is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 2,979 in Hong Kong Exchanges on February 1, 2024 and sell it today you would earn a total of 216.00 from holding Hong Kong Exchanges or generate 7.25% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
ASX Limited vs. Hong Kong Exchanges
Performance |
Timeline |
ASX Limited |
Hong Kong Exchanges |
ASX and Hong Kong Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with ASX and Hong Kong
The main advantage of trading using opposite ASX and Hong Kong positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ASX position performs unexpectedly, Hong Kong 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 Hong Kong will offset losses from the drop in Hong Kong's long position.ASX vs. TMX Group Limited | ASX vs. Otc Markets Group | ASX vs. Dun Bradstreet Holdings | ASX vs. FactSet Research Systems |
Hong Kong vs. TMX Group Limited | Hong Kong vs. Otc Markets Group | Hong Kong vs. Dun Bradstreet Holdings | Hong Kong vs. FactSet Research Systems |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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