Correlation Between DAX Index and Beta Systems
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By analyzing existing cross correlation between DAX Index and Beta Systems Software, you can compare the effects of market volatilities on DAX Index and Beta Systems 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 Beta Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of DAX Index and Beta Systems.
Diversification Opportunities for DAX Index and Beta Systems
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between DAX and Beta is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding DAX Index and Beta Systems Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beta Systems Software 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 Beta Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beta Systems Software has no effect on the direction of DAX Index i.e., DAX Index and Beta Systems go up and down completely randomly.
Pair Corralation between DAX Index and Beta Systems
Assuming the 90 days trading horizon DAX Index is expected to generate 0.49 times more return on investment than Beta Systems. However, DAX Index is 2.06 times less risky than Beta Systems. It trades about 0.09 of its potential returns per unit of risk. Beta Systems Software is currently generating about -0.06 per unit of risk. If you would invest 1,541,205 in DAX Index on October 30, 2024 and sell it today you would earn a total of 587,013 from holding DAX Index or generate 38.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 93.4% |
| Values | Daily Returns |
DAX Index vs. Beta Systems Software
Performance |
| Timeline |
DAX Index and Beta Systems Volatility Contrast
Predicted Return Density |
| Returns |
DAX Index
Pair trading matchups for DAX Index
Beta Systems Software
Pair trading matchups for Beta Systems
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Beta Systems as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Beta Systems' systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Beta Systems' unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Beta Systems Software.
Pair Trading with DAX Index and Beta Systems
The main advantage of trading using opposite DAX Index and Beta Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DAX Index position performs unexpectedly, Beta Systems 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 Beta Systems will offset losses from the drop in Beta Systems' long position.| DAX Index vs. Ribbon Communications | DAX Index vs. Highlight Communications AG | DAX Index vs. Cairo Communication SpA | DAX Index vs. Spirent Communications plc |
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Beta Systems as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Beta Systems' systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Beta Systems' unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Beta Systems Software.
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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