Correlation Between Deka MDAX and Deka EURO

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

Diversification Opportunities for Deka MDAX and Deka EURO

0.25

Correlation Coefficient

Deka MDAX  Deka EURO

Modest diversification

The 3 months correlation between Deka and Deka is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Deka MDAX UCITS and Deka EURO STOXX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deka EURO STOXX 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 EURO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deka EURO STOXX has no effect on the direction of Deka MDAX i.e., Deka MDAX and Deka EURO go up and down completely randomly.

Pair Corralation between Deka MDAX and Deka EURO

Assuming the 90 days trading horizon Deka MDAX UCITS is expected to under-perform the Deka EURO. In addition to that, Deka MDAX is 1.21 times more volatile than Deka EURO STOXX. It trades about -0.06 of its total potential returns per unit of risk. Deka EURO STOXX is currently generating about -0.02 per unit of volatility. If you would invest  1,641  in Deka EURO STOXX on September 19, 2024 and sell it today you would lose (5.00) from holding Deka EURO STOXX or give up 0.3% of portfolio value over 90 days.

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

Deka MDAX UCITS  vs.  Deka EURO STOXX

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 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.

Pair Trading with Deka MDAX and Deka EURO

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

The idea behind Deka MDAX UCITS and Deka EURO STOXX 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.