Correlation Between Deka EURO and IShares Core

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

By analyzing existing cross correlation between Deka EURO STOXX and iShares Core DAX, you can compare the effects of market volatilities on Deka EURO and IShares Core 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 Deka EURO with a short position of IShares Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deka EURO and IShares Core.

Diversification Opportunities for Deka EURO and IShares Core

-0.18

Correlation Coefficient

Deka EURO  IShares Core

Good diversification

The 3 months correlation between Deka and IShares is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Deka EURO STOXX and iShares Core DAX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core DAX and Deka EURO 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 Deka EURO STOXX are associated (or correlated) with IShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core DAX has no effect on the direction of Deka EURO i.e., Deka EURO and IShares Core go up and down completely randomly.

Pair Corralation between Deka EURO and IShares Core

Assuming the 90 days trading horizon Deka EURO STOXX is expected to generate 2.32 times more return on investment than IShares Core. However, Deka EURO is 2.32 times more volatile than iShares Core DAX. It trades about 0.02 of its potential returns per unit of risk. iShares Core DAX is currently generating about -0.43 per unit of risk. If you would invest  1,633  in Deka EURO STOXX on October 7, 2024 and sell it today you would earn a total of  3.00  from holding Deka EURO STOXX or generate 0.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.12%
Values	Daily Returns

Deka EURO STOXX  vs.  iShares Core DAX

Deka EURO STOXX

Risk-Adjusted Performance

0 of 100

Very Weak

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

iShares Core DAX

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core DAX are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, IShares Core is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Deka EURO and IShares Core

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

The idea behind Deka EURO STOXX and iShares Core DAX 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 Stocks Directory module to find actively traded stocks across global markets.