Correlation Between DAX Index and Isetan Mitsukoshi

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

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

Diversification Opportunities for DAX Index and Isetan Mitsukoshi

0.52

Correlation Coefficient

DAX Index  Isetan Mitsukoshi

Very weak diversification

The 3 months correlation between DAX and Isetan is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding DAX Index and Isetan Mitsukoshi Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Isetan Mitsukoshi 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 Isetan Mitsukoshi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Isetan Mitsukoshi has no effect on the direction of DAX Index i.e., DAX Index and Isetan Mitsukoshi go up and down completely randomly.

Pair Corralation between DAX Index and Isetan Mitsukoshi

Assuming the 90 days trading horizon DAX Index is expected to generate 2.09 times less return on investment than Isetan Mitsukoshi. But when comparing it to its historical volatility, DAX Index is 4.37 times less risky than Isetan Mitsukoshi. It trades about 0.07 of its potential returns per unit of risk. Isetan Mitsukoshi Holdings is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,340  in Isetan Mitsukoshi Holdings on September 24, 2024 and sell it today you would earn a total of  140.00  from holding Isetan Mitsukoshi Holdings or generate 10.45% return on investment over 90 days.

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

DAX Index  vs.  Isetan Mitsukoshi Holdings

Pair Trading with DAX Index and Isetan Mitsukoshi

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

The idea behind DAX Index and Isetan Mitsukoshi Holdings 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.