Correlation Between Deutsche Boerse and CochLear

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

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

Diversification Opportunities for Deutsche Boerse and CochLear

-0.63

Correlation Coefficient

Deutsche Boerse  CochLear

Excellent diversification

The 3 months correlation between Deutsche and CochLear is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Boerse AG and CochLear Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CochLear ADR and Deutsche Boerse 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 Deutsche Boerse AG are associated (or correlated) with CochLear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CochLear ADR has no effect on the direction of Deutsche Boerse i.e., Deutsche Boerse and CochLear go up and down completely randomly.

Pair Corralation between Deutsche Boerse and CochLear

Assuming the 90 days horizon Deutsche Boerse AG is expected to generate 0.48 times more return on investment than CochLear. However, Deutsche Boerse AG is 2.07 times less risky than CochLear. It trades about 0.34 of its potential returns per unit of risk. CochLear Ltd ADR is currently generating about -0.03 per unit of risk. If you would invest  2,305  in Deutsche Boerse AG on December 22, 2024 and sell it today you would earn a total of  580.00  from holding Deutsche Boerse AG or generate 25.16% return on investment over 90 days.

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

Deutsche Boerse AG  vs.  CochLear Ltd ADR

Deutsche Boerse AG

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Boerse AG are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Deutsche Boerse showed solid returns over the last few months and may actually be approaching a breakup point.

CochLear ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days CochLear Ltd ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, CochLear is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Deutsche Boerse and CochLear

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

The idea behind Deutsche Boerse AG and CochLear Ltd ADR 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 Commodity Directory module to find actively traded commodities issued by global exchanges.