Correlation Between DAX Index and Ringmetall

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

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

Diversification Opportunities for DAX Index and Ringmetall

0.26

Correlation Coefficient

DAX Index  Ringmetall

Modest diversification

The 3 months correlation between DAX and Ringmetall is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding DAX Index and Ringmetall SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ringmetall SE 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 Ringmetall. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ringmetall SE has no effect on the direction of DAX Index i.e., DAX Index and Ringmetall go up and down completely randomly.

Pair Corralation between DAX Index and Ringmetall

Assuming the 90 days trading horizon DAX Index is expected to generate 0.33 times more return on investment than Ringmetall. However, DAX Index is 3.07 times less risky than Ringmetall. It trades about 0.2 of its potential returns per unit of risk. Ringmetall SE is currently generating about 0.05 per unit of risk. If you would invest  1,998,432  in DAX Index on December 25, 2024 and sell it today you would earn a total of  286,834  from holding DAX Index or generate 14.35% return on investment over 90 days.

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

DAX Index  vs.  Ringmetall SE

Pair Trading with DAX Index and Ringmetall

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

The idea behind DAX Index and Ringmetall SE 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .