Correlation Between DAX Index and Algebris UCITS

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

By analyzing existing cross correlation between DAX Index and Algebris UCITS Funds, you can compare the effects of market volatilities on DAX Index and Algebris UCITS 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 DAX Index with a short position of Algebris UCITS. Check out your portfolio center. Please also check ongoing floating volatility patterns of DAX Index and Algebris UCITS.

Diversification Opportunities for DAX Index and Algebris UCITS

0.37

Correlation Coefficient

DAX Index  Algebris UCITS

Weak diversification

The 3 months correlation between DAX and Algebris is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding DAX Index and Algebris UCITS Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Algebris UCITS Funds and DAX Index 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 DAX Index are associated (or correlated) with Algebris UCITS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Algebris UCITS Funds has no effect on the direction of DAX Index i.e., DAX Index and Algebris UCITS go up and down completely randomly.

Pair Corralation between DAX Index and Algebris UCITS

Assuming the 90 days trading horizon DAX Index is expected to under-perform the Algebris UCITS. In addition to that, DAX Index is 2.96 times more volatile than Algebris UCITS Funds. It trades about -0.28 of its total potential returns per unit of risk. Algebris UCITS Funds is currently generating about 0.17 per unit of volatility. If you would invest  14,861  in Algebris UCITS Funds on October 6, 2024 and sell it today you would earn a total of  70.00  from holding Algebris UCITS Funds or generate 0.47% return on investment over 90 days.

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

DAX Index  vs.  Algebris UCITS Funds

Pair Trading with DAX Index and Algebris UCITS

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

The idea behind DAX Index and Algebris UCITS Funds 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.