Correlation Between DAX Index and AXWAY SOFTWARE

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

Diversification Opportunities for DAX Index and AXWAY SOFTWARE

0.54
  Correlation Coefficient

Very weak diversification

The 3 months correlation between DAX and AXWAY is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding DAX Index and AXWAY SOFTWARE EO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AXWAY SOFTWARE EO and DAX Index 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 DAX Index are associated (or correlated) with AXWAY SOFTWARE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AXWAY SOFTWARE EO has no effect on the direction of DAX Index i.e., DAX Index and AXWAY SOFTWARE go up and down completely randomly.
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Pair Corralation between DAX Index and AXWAY SOFTWARE

Assuming the 90 days trading horizon DAX Index is expected to generate 1.49 times less return on investment than AXWAY SOFTWARE. But when comparing it to its historical volatility, DAX Index is 2.6 times less risky than AXWAY SOFTWARE. It trades about 0.08 of its potential returns per unit of risk. AXWAY SOFTWARE EO is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,120  in AXWAY SOFTWARE EO on August 31, 2024 and sell it today you would earn a total of  600.00  from holding AXWAY SOFTWARE EO or generate 28.3% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy99.74%
ValuesDaily Returns

DAX Index  vs.  AXWAY SOFTWARE EO

 Performance 
       Timeline  

DAX Index and AXWAY SOFTWARE Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with DAX Index and AXWAY SOFTWARE

The main advantage of trading using opposite DAX Index and AXWAY SOFTWARE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DAX Index position performs unexpectedly, AXWAY SOFTWARE 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 AXWAY SOFTWARE will offset losses from the drop in AXWAY SOFTWARE's long position.
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The idea behind DAX Index and AXWAY SOFTWARE EO 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.

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