Correlation Between DAX Index and Veeva Systems

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

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

Diversification Opportunities for DAX Index and Veeva Systems

0.63

Correlation Coefficient

DAX Index  Veeva Systems

Poor diversification

The 3 months correlation between DAX and Veeva is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding DAX Index and Veeva Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Veeva 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 Veeva Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Veeva Systems has no effect on the direction of DAX Index i.e., DAX Index and Veeva Systems go up and down completely randomly.

Pair Corralation between DAX Index and Veeva Systems

Assuming the 90 days trading horizon DAX Index is expected to generate 0.35 times more return on investment than Veeva Systems. However, DAX Index is 2.88 times less risky than Veeva Systems. It trades about -0.09 of its potential returns per unit of risk. Veeva Systems is currently generating about -0.19 per unit of risk. If you would invest  2,042,627  in DAX Index on October 13, 2024 and sell it today you would lose (21,148) from holding DAX Index or give up 1.04% of portfolio value over 90 days.

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

DAX Index  vs.  Veeva Systems

Pair Trading with DAX Index and Veeva Systems

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

The idea behind DAX Index and Veeva 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.