Correlation Between Hub24 and ASX

Can any of the company-specific risk be diversified away by investing in both Hub24 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 Hub24 and ASX into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hub24 and ASX, you can compare the effects of market volatilities on Hub24 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 Hub24 with a short position of ASX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hub24 and ASX.

Diversification Opportunities for Hub24 and ASX

0.7

Correlation Coefficient

Hub24  ASX

Poor diversification

The 3 months correlation between Hub24 and ASX is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Hub24 and ASX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASX and Hub24 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 Hub24 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 Hub24 i.e., Hub24 and ASX go up and down completely randomly.

Pair Corralation between Hub24 and ASX

Assuming the 90 days trading horizon Hub24 is expected to generate 1.39 times more return on investment than ASX. However, Hub24 is 1.39 times more volatile than ASX. It trades about 0.21 of its potential returns per unit of risk. ASX is currently generating about 0.09 per unit of risk. If you would invest  4,542  in Hub24 on September 22, 2024 and sell it today you would earn a total of  2,335  from holding Hub24 or generate 51.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.24%
Values	Daily Returns

Hub24  vs.  ASX

Hub24

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hub24 are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental drivers, Hub24 unveiled solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Hub24 and ASX

The main advantage of trading using opposite Hub24 and ASX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hub24 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 Hub24 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.