Correlation Between STORE ELECTRONIC and DAX Index

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

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

Diversification Opportunities for STORE ELECTRONIC and DAX Index

-0.12

Correlation Coefficient

STORE ELECTRONIC  DAX Index

Good diversification

The 3 months correlation between STORE and DAX is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding STORE ELECTRONIC and DAX Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DAX Index and STORE ELECTRONIC 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 STORE ELECTRONIC are associated (or correlated) with DAX Index. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DAX Index has no effect on the direction of STORE ELECTRONIC i.e., STORE ELECTRONIC and DAX Index go up and down completely randomly.

Pair Corralation between STORE ELECTRONIC and DAX Index

Assuming the 90 days trading horizon STORE ELECTRONIC is expected to generate 3.05 times more return on investment than DAX Index. However, STORE ELECTRONIC is 3.05 times more volatile than DAX Index. It trades about 0.07 of its potential returns per unit of risk. DAX Index is currently generating about 0.08 per unit of risk. If you would invest  14,350  in STORE ELECTRONIC on October 4, 2024 and sell it today you would earn a total of  3,130  from holding STORE ELECTRONIC or generate 21.81% return on investment over 90 days.

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

STORE ELECTRONIC  vs.  DAX Index

Pair Trading with STORE ELECTRONIC and DAX Index

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

The idea behind STORE ELECTRONIC and DAX Index 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.