Correlation Between DAX Index and ZhongAn Online

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

Diversification Opportunities for DAX Index and ZhongAn Online

0.24
  Correlation Coefficient

Modest diversification

The 3 months correlation between DAX and ZhongAn is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding DAX Index and ZhongAn Online P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZhongAn Online P 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 ZhongAn Online. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZhongAn Online P has no effect on the direction of DAX Index i.e., DAX Index and ZhongAn Online go up and down completely randomly.
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Pair Corralation between DAX Index and ZhongAn Online

Assuming the 90 days trading horizon DAX Index is expected to generate 0.23 times more return on investment than ZhongAn Online. However, DAX Index is 4.43 times less risky than ZhongAn Online. It trades about 0.1 of its potential returns per unit of risk. ZhongAn Online P is currently generating about -0.01 per unit of risk. If you would invest  1,399,510  in DAX Index on September 14, 2024 and sell it today you would earn a total of  643,117  from holding DAX Index or generate 45.95% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

DAX Index  vs.  ZhongAn Online P

 Performance 
       Timeline  

DAX Index and ZhongAn Online Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with DAX Index and ZhongAn Online

The main advantage of trading using opposite DAX Index and ZhongAn Online positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DAX Index position performs unexpectedly, ZhongAn Online 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 ZhongAn Online will offset losses from the drop in ZhongAn Online's long position.
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The idea behind DAX Index and ZhongAn Online P 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.

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