Correlation Between DAX Index and VOXX INTL-A

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

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

Diversification Opportunities for DAX Index and VOXX INTL-A

-0.58

Correlation Coefficient

DAX Index  VOXX INTL-A

Excellent diversification

The 3 months correlation between DAX and VOXX is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding DAX Index and VOXX INTL A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VOXX INTL A 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 VOXX INTL-A. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VOXX INTL A has no effect on the direction of DAX Index i.e., DAX Index and VOXX INTL-A go up and down completely randomly.

Pair Corralation between DAX Index and VOXX INTL-A

Assuming the 90 days trading horizon DAX Index is expected to generate 1.53 times more return on investment than VOXX INTL-A. However, DAX Index is 1.53 times more volatile than VOXX INTL A. It trades about 0.22 of its potential returns per unit of risk. VOXX INTL A is currently generating about -0.14 per unit of risk. If you would invest  1,984,877  in DAX Index on December 21, 2024 and sell it today you would earn a total of  315,038  from holding DAX Index or generate 15.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

DAX Index  vs.  VOXX INTL A

Pair Trading with DAX Index and VOXX INTL-A

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

The idea behind DAX Index and VOXX INTL A 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.