Correlation Between DAX Index and GREEN PLAINS

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Can any of the company-specific risk be diversified away by investing in both DAX Index and GREEN PLAINS 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 GREEN PLAINS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DAX Index and GREEN PLAINS, you can compare the effects of market volatilities on DAX Index and GREEN PLAINS 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 GREEN PLAINS. Check out your portfolio center. Please also check ongoing floating volatility patterns of DAX Index and GREEN PLAINS.

Diversification Opportunities for DAX Index and GREEN PLAINS

-0.4
  Correlation Coefficient

Very good diversification

The 3 months correlation between DAX and GREEN is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding DAX Index and GREEN PLAINS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GREEN PLAINS 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 GREEN PLAINS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GREEN PLAINS has no effect on the direction of DAX Index i.e., DAX Index and GREEN PLAINS go up and down completely randomly.
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Pair Corralation between DAX Index and GREEN PLAINS

Assuming the 90 days trading horizon DAX Index is expected to generate 0.17 times more return on investment than GREEN PLAINS. However, DAX Index is 5.94 times less risky than GREEN PLAINS. It trades about 0.13 of its potential returns per unit of risk. GREEN PLAINS is currently generating about -0.06 per unit of risk. If you would invest  1,906,647  in DAX Index on October 8, 2024 and sell it today you would earn a total of  114,972  from holding DAX Index or generate 6.03% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

DAX Index  vs.  GREEN PLAINS

 Performance 
       Timeline  

DAX Index and GREEN PLAINS Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with DAX Index and GREEN PLAINS

The main advantage of trading using opposite DAX Index and GREEN PLAINS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DAX Index position performs unexpectedly, GREEN PLAINS 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 GREEN PLAINS will offset losses from the drop in GREEN PLAINS's long position.
The idea behind DAX Index and GREEN PLAINS 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.

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