Correlation Between DAX Index and Metalla Royalty

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

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

Diversification Opportunities for DAX Index and Metalla Royalty

-0.39

Correlation Coefficient

DAX Index  Metalla Royalty

Very good diversification

The 3 months correlation between DAX and Metalla is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding DAX Index and Metalla Royalty Streaming in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metalla Royalty Streaming 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 Metalla Royalty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metalla Royalty Streaming has no effect on the direction of DAX Index i.e., DAX Index and Metalla Royalty go up and down completely randomly.

Pair Corralation between DAX Index and Metalla Royalty

Assuming the 90 days trading horizon DAX Index is expected to generate 0.24 times more return on investment than Metalla Royalty. However, DAX Index is 4.09 times less risky than Metalla Royalty. It trades about 0.26 of its potential returns per unit of risk. Metalla Royalty Streaming is currently generating about -0.07 per unit of risk. If you would invest  1,914,617  in DAX Index on September 22, 2024 and sell it today you would earn a total of  73,858  from holding DAX Index or generate 3.86% return on investment over 90 days.

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

DAX Index  vs.  Metalla Royalty Streaming

Pair Trading with DAX Index and Metalla Royalty

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

The idea behind DAX Index and Metalla Royalty Streaming 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.