Correlation Between DAX Index and CITIUS PHARMAC

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

By analyzing existing cross correlation between DAX Index and CITIUS PHARMAC DL, you can compare the effects of market volatilities on DAX Index and CITIUS PHARMAC 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 CITIUS PHARMAC. Check out your portfolio center. Please also check ongoing floating volatility patterns of DAX Index and CITIUS PHARMAC.

Diversification Opportunities for DAX Index and CITIUS PHARMAC

-0.72

Correlation Coefficient

DAX Index  CITIUS PHARMAC

Pay attention - limited upside

The 3 months correlation between DAX and CITIUS is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding DAX Index and CITIUS PHARMAC DL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITIUS PHARMAC DL 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 CITIUS PHARMAC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CITIUS PHARMAC DL has no effect on the direction of DAX Index i.e., DAX Index and CITIUS PHARMAC go up and down completely randomly.

Pair Corralation between DAX Index and CITIUS PHARMAC

Assuming the 90 days trading horizon DAX Index is expected to generate 0.1 times more return on investment than CITIUS PHARMAC. However, DAX Index is 9.9 times less risky than CITIUS PHARMAC. It trades about 0.18 of its potential returns per unit of risk. CITIUS PHARMAC DL is currently generating about -0.2 per unit of risk. If you would invest  1,863,311  in DAX Index on September 16, 2024 and sell it today you would earn a total of  177,281  from holding DAX Index or generate 9.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.48%
Values	Daily Returns

DAX Index  vs.  CITIUS PHARMAC DL

Pair Trading with DAX Index and CITIUS PHARMAC

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

The idea behind DAX Index and CITIUS PHARMAC DL 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.