Correlation Between DAX Index and DON QUIJOTE

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

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

Diversification Opportunities for DAX Index and DON QUIJOTE

0.0

Correlation Coefficient

DAX Index  DON QUIJOTE

Pay attention - limited upside

The 3 months correlation between DAX and DON is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding DAX Index and DON QUIJOTE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DON QUIJOTE 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 DON QUIJOTE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DON QUIJOTE has no effect on the direction of DAX Index i.e., DAX Index and DON QUIJOTE go up and down completely randomly.

Pair Corralation between DAX Index and DON QUIJOTE

If you would invest  1,944,300  in DAX Index on October 24, 2024 and sell it today you would earn a total of  181,127  from holding DAX Index or generate 9.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

DAX Index  vs.  DON QUIJOTE

Pair Trading with DAX Index and DON QUIJOTE

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

The idea behind DAX Index and DON QUIJOTE 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.