Correlation Between ASX and Future Generation

Can any of the company-specific risk be diversified away by investing in both ASX and Future Generation 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 Future Generation into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ASX and Future Generation Global, you can compare the effects of market volatilities on ASX and Future Generation 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 Future Generation. Check out your portfolio center. Please also check ongoing floating volatility patterns of ASX and Future Generation.

Diversification Opportunities for ASX and Future Generation

0.5

Correlation Coefficient

ASX  Future Generation

Very weak diversification

The 3 months correlation between ASX and Future is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding ASX and Future Generation Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Future Generation Global 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 are associated (or correlated) with Future Generation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Future Generation Global has no effect on the direction of ASX i.e., ASX and Future Generation go up and down completely randomly.

Pair Corralation between ASX and Future Generation

Assuming the 90 days trading horizon ASX is expected to generate 4.98 times less return on investment than Future Generation. In addition to that, ASX is 1.15 times more volatile than Future Generation Global. It trades about 0.01 of its total potential returns per unit of risk. Future Generation Global is currently generating about 0.06 per unit of volatility. If you would invest  105.00  in Future Generation Global on October 4, 2024 and sell it today you would earn a total of  37.00  from holding Future Generation Global or generate 35.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

ASX  vs.  Future Generation Global

ASX

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ASX are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, ASX is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Future Generation Global

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Future Generation Global are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Future Generation may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with ASX and Future Generation

The main advantage of trading using opposite ASX and Future Generation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ASX position performs unexpectedly, Future Generation 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 Future Generation will offset losses from the drop in Future Generation's long position.

The idea behind ASX and Future Generation Global pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.