Correlation Between DAX Index and Invesco Quantitative

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

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

Diversification Opportunities for DAX Index and Invesco Quantitative

0.69

Correlation Coefficient

DAX Index  Invesco Quantitative

Poor diversification

The 3 months correlation between DAX and Invesco is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding DAX Index and Invesco Quantitative Strats in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Quantitative 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 Invesco Quantitative. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Quantitative has no effect on the direction of DAX Index i.e., DAX Index and Invesco Quantitative go up and down completely randomly.

Pair Corralation between DAX Index and Invesco Quantitative

Assuming the 90 days trading horizon DAX Index is expected to generate 1.19 times less return on investment than Invesco Quantitative. In addition to that, DAX Index is 1.32 times more volatile than Invesco Quantitative Strats. It trades about 0.1 of its total potential returns per unit of risk. Invesco Quantitative Strats is currently generating about 0.16 per unit of volatility. If you would invest  514.00  in Invesco Quantitative Strats on September 28, 2024 and sell it today you would earn a total of  134.00  from holding Invesco Quantitative Strats or generate 26.07% 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.  Invesco Quantitative Strats

Pair Trading with DAX Index and Invesco Quantitative

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

The idea behind DAX Index and Invesco Quantitative Strats 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.