Correlation Between DAX Index and Macerich

Can any of the company-specific risk be diversified away by investing in both DAX Index and Macerich 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 Macerich 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 Macerich, you can compare the effects of market volatilities on DAX Index and Macerich 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 Macerich. Check out your portfolio center. Please also check ongoing floating volatility patterns of DAX Index and Macerich.

Diversification Opportunities for DAX Index and Macerich

0.75

Correlation Coefficient

DAX Index  Macerich

Poor diversification

The 3 months correlation between DAX and Macerich is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding DAX Index and The Macerich in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macerich 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 Macerich. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Macerich has no effect on the direction of DAX Index i.e., DAX Index and Macerich go up and down completely randomly.

Pair Corralation between DAX Index and Macerich

Assuming the 90 days trading horizon DAX Index is expected to generate 3.47 times less return on investment than Macerich. But when comparing it to its historical volatility, DAX Index is 3.26 times less risky than Macerich. It trades about 0.1 of its potential returns per unit of risk. The Macerich is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,047  in The Macerich on September 28, 2024 and sell it today you would earn a total of  876.00  from holding The Macerich or generate 83.67% 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 Macerich

Pair Trading with DAX Index and Macerich

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

The idea behind DAX Index and The Macerich 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.