Correlation Between Deka MDAX and Deka IBoxx

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

By analyzing existing cross correlation between Deka MDAX UCITS and Deka iBoxx EUR, you can compare the effects of market volatilities on Deka MDAX and Deka IBoxx 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 MDAX with a short position of Deka IBoxx. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deka MDAX and Deka IBoxx.

Diversification Opportunities for Deka MDAX and Deka IBoxx

0.02

Correlation Coefficient

Deka MDAX  Deka IBoxx

Significant diversification

The 3 months correlation between Deka and Deka is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Deka MDAX UCITS and Deka iBoxx EUR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deka iBoxx EUR and Deka MDAX 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 MDAX UCITS are associated (or correlated) with Deka IBoxx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deka iBoxx EUR has no effect on the direction of Deka MDAX i.e., Deka MDAX and Deka IBoxx go up and down completely randomly.

Pair Corralation between Deka MDAX and Deka IBoxx

Assuming the 90 days trading horizon Deka MDAX UCITS is expected to under-perform the Deka IBoxx. In addition to that, Deka MDAX is 3.85 times more volatile than Deka iBoxx EUR. It trades about 0.0 of its total potential returns per unit of risk. Deka iBoxx EUR is currently generating about 0.14 per unit of volatility. If you would invest  9,542  in Deka iBoxx EUR on September 22, 2024 and sell it today you would earn a total of  395.00  from holding Deka iBoxx EUR or generate 4.14% return on investment over 90 days.

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

Deka MDAX UCITS  vs.  Deka iBoxx EUR

Deka MDAX UCITS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Deka MDAX UCITS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Deka MDAX is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Deka iBoxx EUR

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Deka iBoxx EUR are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Deka IBoxx 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 MDAX and Deka IBoxx

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

The idea behind Deka MDAX UCITS and Deka iBoxx EUR 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.