Correlation Between DAX Index and Adobe

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

Diversification Opportunities for DAX Index and Adobe

-0.68
  Correlation Coefficient

Excellent diversification

The 3 months correlation between DAX and Adobe is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding DAX Index and Adobe Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adobe Inc 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 Adobe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adobe Inc has no effect on the direction of DAX Index i.e., DAX Index and Adobe go up and down completely randomly.
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Pair Corralation between DAX Index and Adobe

Assuming the 90 days trading horizon DAX Index is expected to under-perform the Adobe. But the index apears to be less risky and, when comparing its historical volatility, DAX Index is 2.47 times less risky than Adobe. The index trades about -0.05 of its potential returns per unit of risk. The Adobe Inc is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  44,605  in Adobe Inc on August 29, 2024 and sell it today you would earn a total of  4,490  from holding Adobe Inc or generate 10.07% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

DAX Index  vs.  Adobe Inc

 Performance 
       Timeline  

DAX Index and Adobe Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with DAX Index and Adobe

The main advantage of trading using opposite DAX Index and Adobe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DAX Index position performs unexpectedly, Adobe 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 Adobe will offset losses from the drop in Adobe's long position.
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The idea behind DAX Index and Adobe Inc 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.

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