Correlation Between DAX Index and Fresenius

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

Diversification Opportunities for DAX Index and Fresenius

-0.12
  Correlation Coefficient

Good diversification

The 3 months correlation between DAX and Fresenius is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding DAX Index and Fresenius SE Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fresenius SE 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 Fresenius. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fresenius SE has no effect on the direction of DAX Index i.e., DAX Index and Fresenius go up and down completely randomly.
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Pair Corralation between DAX Index and Fresenius

Assuming the 90 days trading horizon DAX Index is expected to generate 3.73 times less return on investment than Fresenius. But when comparing it to its historical volatility, DAX Index is 1.59 times less risky than Fresenius. It trades about 0.05 of its potential returns per unit of risk. Fresenius SE Co is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  2,556  in Fresenius SE Co on September 3, 2024 and sell it today you would earn a total of  773.00  from holding Fresenius SE Co or generate 30.24% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

DAX Index  vs.  Fresenius SE Co

 Performance 
       Timeline  

DAX Index and Fresenius Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with DAX Index and Fresenius

The main advantage of trading using opposite DAX Index and Fresenius positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DAX Index position performs unexpectedly, Fresenius 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 Fresenius will offset losses from the drop in Fresenius' long position.
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The idea behind DAX Index and Fresenius SE Co 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..

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