Correlation Between LONDON STEXUNSPADRS12 and Deutsche Brse

Can any of the company-specific risk be diversified away by investing in both LONDON STEXUNSPADRS12 and Deutsche Brse 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 LONDON STEXUNSPADRS12 and Deutsche Brse into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between LONDON STEXUNSPADRS12 and Deutsche Brse AG, you can compare the effects of market volatilities on LONDON STEXUNSPADRS12 and Deutsche Brse 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 LONDON STEXUNSPADRS12 with a short position of Deutsche Brse. Check out your portfolio center. Please also check ongoing floating volatility patterns of LONDON STEXUNSPADRS12 and Deutsche Brse.

Diversification Opportunities for LONDON STEXUNSPADRS12 and Deutsche Brse

0.7

Correlation Coefficient

LONDON STEXUNSPADRS12  Deutsche Brse

Poor diversification

The 3 months correlation between LONDON and Deutsche is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding LONDON STEXUNSPADRS12 and Deutsche Brse AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Brse AG and LONDON STEXUNSPADRS12 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 LONDON STEXUNSPADRS12 are associated (or correlated) with Deutsche Brse. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Brse AG has no effect on the direction of LONDON STEXUNSPADRS12 i.e., LONDON STEXUNSPADRS12 and Deutsche Brse go up and down completely randomly.

Pair Corralation between LONDON STEXUNSPADRS12 and Deutsche Brse

Assuming the 90 days trading horizon LONDON STEXUNSPADRS12 is expected to generate 1.9 times more return on investment than Deutsche Brse. However, LONDON STEXUNSPADRS12 is 1.9 times more volatile than Deutsche Brse AG. It trades about 0.11 of its potential returns per unit of risk. Deutsche Brse AG is currently generating about 0.12 per unit of risk. If you would invest  3,020  in LONDON STEXUNSPADRS12 on September 14, 2024 and sell it today you would earn a total of  360.00  from holding LONDON STEXUNSPADRS12 or generate 11.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

LONDON STEXUNSPADRS12  vs.  Deutsche Brse AG

LONDON STEXUNSPADRS12

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LONDON STEXUNSPADRS12 are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, LONDON STEXUNSPADRS12 may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Deutsche Brse AG

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Brse AG are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Deutsche Brse may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with LONDON STEXUNSPADRS12 and Deutsche Brse

The main advantage of trading using opposite LONDON STEXUNSPADRS12 and Deutsche Brse positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LONDON STEXUNSPADRS12 position performs unexpectedly, Deutsche Brse 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 Deutsche Brse will offset losses from the drop in Deutsche Brse's long position.

The idea behind LONDON STEXUNSPADRS12 and Deutsche Brse AG 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.

Check out your portfolio center.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.