Correlation Between DAX Index and Grupo Carso

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

Diversification Opportunities for DAX Index and Grupo Carso

0.61
  Correlation Coefficient

Poor diversification

The 3 months correlation between DAX and Grupo is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding DAX Index and Grupo Carso SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Carso SAB 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 Grupo Carso. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Carso SAB has no effect on the direction of DAX Index i.e., DAX Index and Grupo Carso go up and down completely randomly.
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Pair Corralation between DAX Index and Grupo Carso

Assuming the 90 days trading horizon DAX Index is expected to generate 1.83 times less return on investment than Grupo Carso. But when comparing it to its historical volatility, DAX Index is 2.84 times less risky than Grupo Carso. It trades about 0.14 of its potential returns per unit of risk. Grupo Carso SAB is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  525.00  in Grupo Carso SAB on September 1, 2024 and sell it today you would earn a total of  25.00  from holding Grupo Carso SAB or generate 4.76% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

DAX Index  vs.  Grupo Carso SAB

 Performance 
       Timeline  

DAX Index and Grupo Carso Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with DAX Index and Grupo Carso

The main advantage of trading using opposite DAX Index and Grupo Carso positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DAX Index position performs unexpectedly, Grupo Carso 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 Grupo Carso will offset losses from the drop in Grupo Carso's long position.
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The idea behind DAX Index and Grupo Carso SAB 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.

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