Correlation Between DAX Index and DSV AS

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

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

Diversification Opportunities for DAX Index and DSV AS

0.12

Correlation Coefficient

DAX Index  DSV AS

Average diversification

The 3 months correlation between DAX and DSV is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding DAX Index and DSV AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DSV AS 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 DSV AS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DSV AS has no effect on the direction of DAX Index i.e., DAX Index and DSV AS go up and down completely randomly.

Pair Corralation between DAX Index and DSV AS

Assuming the 90 days trading horizon DAX Index is expected to generate 0.51 times more return on investment than DSV AS. However, DAX Index is 1.97 times less risky than DSV AS. It trades about 0.09 of its potential returns per unit of risk. DSV AS is currently generating about 0.04 per unit of risk. If you would invest  1,547,643  in DAX Index on October 25, 2024 and sell it today you would earn a total of  577,784  from holding DAX Index or generate 37.33% return on investment over 90 days.

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

DAX Index  vs.  DSV AS

Pair Trading with DAX Index and DSV AS

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

The idea behind DAX Index and DSV AS 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.