Correlation Between DAX Index and PULSION Medical

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

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

Diversification Opportunities for DAX Index and PULSION Medical

0.16

Correlation Coefficient

DAX Index  PULSION Medical

Average diversification

The 3 months correlation between DAX and PULSION is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding DAX Index and PULSION Medical Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PULSION Medical Systems 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 PULSION Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PULSION Medical Systems has no effect on the direction of DAX Index i.e., DAX Index and PULSION Medical go up and down completely randomly.

Pair Corralation between DAX Index and PULSION Medical

Assuming the 90 days trading horizon DAX Index is expected to under-perform the PULSION Medical. But the index apears to be less risky and, when comparing its historical volatility, DAX Index is 1.13 times less risky than PULSION Medical. The index trades about -0.28 of its potential returns per unit of risk. The PULSION Medical Systems is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest  1,620  in PULSION Medical Systems on October 8, 2024 and sell it today you would lose (20.00) from holding PULSION Medical Systems or give up 1.23% of portfolio value over 90 days.

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

DAX Index  vs.  PULSION Medical Systems

Pair Trading with DAX Index and PULSION Medical

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

The idea behind DAX Index and PULSION Medical Systems 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.