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 LTD UNSPONSADR 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

-0.01

Correlation Coefficient

ASX  Deutsche Börse

Good diversification

The 3 months correlation between ASX and Deutsche is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding ASX LTD UNSPONSADR 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 LTD UNSPONSADR 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 trading horizon ASX is expected to generate 61.04 times less return on investment than Deutsche Börse. In addition to that, ASX is 1.55 times more volatile than Deutsche Brse AG. It trades about 0.0 of its total potential returns per unit of risk. Deutsche Brse AG is currently generating about 0.33 per unit of volatility. If you would invest  22,240  in Deutsche Brse AG on December 30, 2024 and sell it today you would earn a total of  4,920  from holding Deutsche Brse AG or generate 22.12% return on investment over 90 days.

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

ASX LTD UNSPONSADR  vs.  Deutsche Brse AG

ASX LTD UNSPONSADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days ASX LTD UNSPONSADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ASX is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Deutsche Brse AG

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Brse AG are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Deutsche Börse unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 LTD UNSPONSADR 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.

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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.