Correlation Between DAX Index and Apple

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

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

Diversification Opportunities for DAX Index and Apple

-0.03

Correlation Coefficient

DAX Index  Apple

Good diversification

The 3 months correlation between DAX and Apple is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding DAX Index and Apple Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apple Inc 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 Apple. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apple Inc has no effect on the direction of DAX Index i.e., DAX Index and Apple go up and down completely randomly.

Pair Corralation between DAX Index and Apple

Assuming the 90 days trading horizon DAX Index is expected to generate 0.48 times more return on investment than Apple. However, DAX Index is 2.1 times less risky than Apple. It trades about 0.34 of its potential returns per unit of risk. Apple Inc is currently generating about 0.04 per unit of risk. If you would invest  1,962,645  in DAX Index on November 29, 2024 and sell it today you would earn a total of  316,766  from holding DAX Index or generate 16.14% 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.  Apple Inc

Pair Trading with DAX Index and Apple

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

The idea behind DAX Index and Apple Inc 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.