Correlation Between FIRST SAVINGS and DAX Index

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Can any of the company-specific risk be diversified away by investing in both FIRST SAVINGS 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 FIRST SAVINGS and DAX Index into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FIRST SAVINGS FINL and DAX Index, you can compare the effects of market volatilities on FIRST SAVINGS 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 FIRST SAVINGS with a short position of DAX Index. Check out your portfolio center. Please also check ongoing floating volatility patterns of FIRST SAVINGS and DAX Index.

Diversification Opportunities for FIRST SAVINGS and DAX Index

0.39
  Correlation Coefficient

Weak diversification

The 3 months correlation between FIRST and DAX is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding FIRST SAVINGS FINL and DAX Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DAX Index and FIRST SAVINGS 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 FIRST SAVINGS FINL 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 FIRST SAVINGS i.e., FIRST SAVINGS and DAX Index go up and down completely randomly.
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Pair Corralation between FIRST SAVINGS and DAX Index

Assuming the 90 days horizon FIRST SAVINGS FINL is expected to under-perform the DAX Index. In addition to that, FIRST SAVINGS is 4.97 times more volatile than DAX Index. It trades about -0.11 of its total potential returns per unit of risk. DAX Index is currently generating about 0.0 per unit of volatility. If you would invest  2,032,916  in DAX Index on October 11, 2024 and sell it today you would lose (1,206) from holding DAX Index or give up 0.06% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

FIRST SAVINGS FINL  vs.  DAX Index

 Performance 
       Timeline  

FIRST SAVINGS and DAX Index Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with FIRST SAVINGS and DAX Index

The main advantage of trading using opposite FIRST SAVINGS and DAX Index positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FIRST SAVINGS 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.
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The idea behind FIRST SAVINGS FINL 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.

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