Correlation Between Japan Exchange and Deutsche Boerse

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

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

Diversification Opportunities for Japan Exchange and Deutsche Boerse

-0.42

Correlation Coefficient

Japan Exchange  Deutsche Boerse

Very good diversification

The 3 months correlation between Japan and Deutsche is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Japan Exchange Group and Deutsche Boerse AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Boerse AG and Japan Exchange 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 Japan Exchange Group are associated (or correlated) with Deutsche Boerse. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Boerse AG has no effect on the direction of Japan Exchange i.e., Japan Exchange and Deutsche Boerse go up and down completely randomly.

Pair Corralation between Japan Exchange and Deutsche Boerse

Assuming the 90 days horizon Japan Exchange is expected to generate 3.92 times less return on investment than Deutsche Boerse. In addition to that, Japan Exchange is 5.79 times more volatile than Deutsche Boerse AG. It trades about 0.02 of its total potential returns per unit of risk. Deutsche Boerse AG is currently generating about 0.37 per unit of volatility. If you would invest  2,337  in Deutsche Boerse AG on December 20, 2024 and sell it today you would earn a total of  619.00  from holding Deutsche Boerse AG or generate 26.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.67%
Values	Daily Returns

Japan Exchange Group  vs.  Deutsche Boerse AG

Japan Exchange Group

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Japan Exchange Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Japan Exchange may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Deutsche Boerse AG

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Boerse AG are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Deutsche Boerse showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Japan Exchange and Deutsche Boerse

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

The idea behind Japan Exchange Group and Deutsche Boerse 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.

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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.