Correlation Between Home Consortium and ASX

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

By analyzing existing cross correlation between Home Consortium and ASX, you can compare the effects of market volatilities on Home Consortium and ASX 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 Home Consortium with a short position of ASX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Consortium and ASX.

Diversification Opportunities for Home Consortium and ASX

0.44

Correlation Coefficient

Home Consortium  ASX

Very weak diversification

The 3 months correlation between Home and ASX is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Home Consortium and ASX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASX and Home Consortium 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 Home Consortium are associated (or correlated) with ASX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASX has no effect on the direction of Home Consortium i.e., Home Consortium and ASX go up and down completely randomly.

Pair Corralation between Home Consortium and ASX

Assuming the 90 days trading horizon Home Consortium is expected to under-perform the ASX. In addition to that, Home Consortium is 4.09 times more volatile than ASX. It trades about -0.25 of its total potential returns per unit of risk. ASX is currently generating about -0.33 per unit of volatility. If you would invest  6,958  in ASX on October 8, 2024 and sell it today you would lose (433.00) from holding ASX or give up 6.22% of portfolio value over 90 days.

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

Home Consortium  vs.  ASX

Home Consortium

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Home Consortium are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, Home Consortium unveiled solid returns over the last few months and may actually be approaching a breakup point.

ASX

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ASX has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Pair Trading with Home Consortium and ASX

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

The idea behind Home Consortium and ASX 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 Global Correlations module to find global opportunities by holding instruments from different markets.