Correlation Between DAX Index and MITSUI FUDOSAN

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

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

Diversification Opportunities for DAX Index and MITSUI FUDOSAN

-0.16

Correlation Coefficient

DAX Index  MITSUI FUDOSAN

Good diversification

The 3 months correlation between DAX and MITSUI is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding DAX Index and MITSUI FUDOSAN LOGPARK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MITSUI FUDOSAN LOGPARK 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 MITSUI FUDOSAN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MITSUI FUDOSAN LOGPARK has no effect on the direction of DAX Index i.e., DAX Index and MITSUI FUDOSAN go up and down completely randomly.

Pair Corralation between DAX Index and MITSUI FUDOSAN

Assuming the 90 days trading horizon DAX Index is expected to generate 0.67 times more return on investment than MITSUI FUDOSAN. However, DAX Index is 1.5 times less risky than MITSUI FUDOSAN. It trades about 0.07 of its potential returns per unit of risk. MITSUI FUDOSAN LOGPARK is currently generating about -0.03 per unit of risk. If you would invest  1,508,652  in DAX Index on October 4, 2024 and sell it today you would earn a total of  482,262  from holding DAX Index or generate 31.97% return on investment over 90 days.

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

DAX Index  vs.  MITSUI FUDOSAN LOGPARK

Pair Trading with DAX Index and MITSUI FUDOSAN

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

The idea behind DAX Index and MITSUI FUDOSAN LOGPARK 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.