Correlation Between Deutsche Boerse and Hong Kong

Can any of the company-specific risk be diversified away by investing in both Deutsche Boerse and Hong Kong 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 Hong Kong 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 Hong Kong Exchanges, you can compare the effects of market volatilities on Deutsche Boerse and Hong Kong 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 Hong Kong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deutsche Boerse and Hong Kong.

Diversification Opportunities for Deutsche Boerse and Hong Kong

0.1

Correlation Coefficient

Deutsche Boerse  Hong Kong

Average diversification

The 3 months correlation between Deutsche and Hong is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Boerse AG and Hong Kong Exchanges in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hong Kong Exchanges 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 Hong Kong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hong Kong Exchanges has no effect on the direction of Deutsche Boerse i.e., Deutsche Boerse and Hong Kong go up and down completely randomly.

Pair Corralation between Deutsche Boerse and Hong Kong

Assuming the 90 days horizon Deutsche Boerse AG is expected to generate 0.23 times more return on investment than Hong Kong. However, Deutsche Boerse AG is 4.28 times less risky than Hong Kong. It trades about -0.02 of its potential returns per unit of risk. Hong Kong Exchanges is currently generating about -0.02 per unit of risk. If you would invest  2,323  in Deutsche Boerse AG on October 9, 2024 and sell it today you would lose (41.00) from holding Deutsche Boerse AG or give up 1.76% of portfolio value over 90 days.

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

Deutsche Boerse AG  vs.  Hong Kong Exchanges

Deutsche Boerse AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Deutsche Boerse AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Deutsche Boerse is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hong Kong Exchanges

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Deutsche Boerse and Hong Kong

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

The idea behind Deutsche Boerse AG and Hong Kong Exchanges 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.