Correlation Between LG DAX and IShares Nikkei
Can any of the company-specific risk be diversified away by investing in both LG DAX and IShares Nikkei 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 LG DAX and IShares Nikkei into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG DAX Daily and iShares Nikkei 225, you can compare the effects of market volatilities on LG DAX and IShares Nikkei 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 LG DAX with a short position of IShares Nikkei. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG DAX and IShares Nikkei.
Diversification Opportunities for LG DAX and IShares Nikkei
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between DES2 and IShares is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding LG DAX Daily and iShares Nikkei 225 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Nikkei 225 and LG DAX 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 LG DAX Daily are associated (or correlated) with IShares Nikkei. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Nikkei 225 has no effect on the direction of LG DAX i.e., LG DAX and IShares Nikkei go up and down completely randomly.
Pair Corralation between LG DAX and IShares Nikkei
Assuming the 90 days trading horizon LG DAX Daily is expected to generate 1.54 times more return on investment than IShares Nikkei. However, LG DAX is 1.54 times more volatile than iShares Nikkei 225. It trades about 0.1 of its potential returns per unit of risk. iShares Nikkei 225 is currently generating about 0.01 per unit of risk. If you would invest 97.00 in LG DAX Daily on August 28, 2024 and sell it today you would earn a total of 3.00 from holding LG DAX Daily or generate 3.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
LG DAX Daily vs. iShares Nikkei 225
Performance |
| Timeline |
| LG DAX Daily |
| iShares Nikkei 225 |
LG DAX and IShares Nikkei Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG DAX and IShares Nikkei
The main advantage of trading using opposite LG DAX and IShares Nikkei positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG DAX position performs unexpectedly, IShares Nikkei 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 IShares Nikkei will offset losses from the drop in IShares Nikkei's long position.| LG DAX vs. LG DAX Daily | LG DAX vs. iShares Govt Bond | LG DAX vs. Amundi MSCI Europe | LG DAX vs. iShares Global AAA AA |
| IShares Nikkei vs. SPDR Gold Shares | IShares Nikkei vs. iShares Core SP | IShares Nikkei vs. iShares Core MSCI |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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