Correlation Between DAX Index and Boeing

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

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

Diversification Opportunities for DAX Index and Boeing

0.74

Correlation Coefficient

DAX Index  Boeing

Poor diversification

The 3 months correlation between DAX and Boeing is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding DAX Index and The Boeing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boeing 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 Boeing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boeing has no effect on the direction of DAX Index i.e., DAX Index and Boeing go up and down completely randomly.

Pair Corralation between DAX Index and Boeing

Assuming the 90 days trading horizon DAX Index is expected to generate 0.4 times more return on investment than Boeing. However, DAX Index is 2.49 times less risky than Boeing. It trades about 0.08 of its potential returns per unit of risk. The Boeing is currently generating about -0.01 per unit of risk. If you would invest  1,550,919  in DAX Index on October 24, 2024 and sell it today you would earn a total of  553,281  from holding DAX Index or generate 35.67% return on investment over 90 days.

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

DAX Index  vs.  The Boeing

Pair Trading with DAX Index and Boeing

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

The idea behind DAX Index and The Boeing 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.