Correlation Between DAX Index and ANGLO ASIAN

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

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

Diversification Opportunities for DAX Index and ANGLO ASIAN

0.0

Correlation Coefficient

DAX Index  ANGLO ASIAN

Pay attention - limited upside

The 3 months correlation between DAX and ANGLO is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding DAX Index and ANGLO ASIAN MINING in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ANGLO ASIAN MINING 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 ANGLO ASIAN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ANGLO ASIAN MINING has no effect on the direction of DAX Index i.e., DAX Index and ANGLO ASIAN go up and down completely randomly.

Pair Corralation between DAX Index and ANGLO ASIAN

Assuming the 90 days trading horizon DAX Index is expected to generate 0.33 times more return on investment than ANGLO ASIAN. However, DAX Index is 3.06 times less risky than ANGLO ASIAN. It trades about 0.11 of its potential returns per unit of risk. ANGLO ASIAN MINING is currently generating about -0.08 per unit of risk. If you would invest  1,925,627  in DAX Index on October 6, 2024 and sell it today you would earn a total of  64,981  from holding DAX Index or generate 3.37% return on investment over 90 days.

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

DAX Index  vs.  ANGLO ASIAN MINING

Pair Trading with DAX Index and ANGLO ASIAN

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

The idea behind DAX Index and ANGLO ASIAN MINING 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.