Correlation Between ASX and Deutsche Börse

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

By analyzing existing cross correlation between ASX Limited and Deutsche Brse AG, you can compare the effects of market volatilities on ASX and Deutsche Börse 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 Deutsche Börse. Check out your portfolio center. Please also check ongoing floating volatility patterns of ASX and Deutsche Börse.

Diversification Opportunities for ASX and Deutsche Börse

0.11

Correlation Coefficient

ASX  Deutsche Börse

Average diversification

The 3 months correlation between ASX and Deutsche is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding ASX Limited and Deutsche Brse AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Brse AG 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 Deutsche Börse. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Brse AG has no effect on the direction of ASX i.e., ASX and Deutsche Börse go up and down completely randomly.

Pair Corralation between ASX and Deutsche Börse

Assuming the 90 days horizon ASX is expected to generate 8.11 times less return on investment than Deutsche Börse. But when comparing it to its historical volatility, ASX Limited is 3.15 times less risky than Deutsche Börse. It trades about 0.05 of its potential returns per unit of risk. Deutsche Brse AG is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  22,809  in Deutsche Brse AG on October 24, 2024 and sell it today you would earn a total of  1,018  from holding Deutsche Brse AG or generate 4.46% 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.  Deutsche Brse AG

ASX Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ASX Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Deutsche Brse AG

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Brse AG are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Deutsche Börse is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with ASX and Deutsche Börse

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

The idea behind ASX Limited and Deutsche Brse AG 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.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.