Correlation Between DAX Index and KCAP FINANCIAL

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

Diversification Opportunities for DAX Index and KCAP FINANCIAL

0.0
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between DAX and KCAP is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding DAX Index and KCAP FINANCIAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KCAP FINANCIAL 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 KCAP FINANCIAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KCAP FINANCIAL has no effect on the direction of DAX Index i.e., DAX Index and KCAP FINANCIAL go up and down completely randomly.
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Pair Corralation between DAX Index and KCAP FINANCIAL

If you would invest  1,479,283  in DAX Index on August 31, 2024 and sell it today you would earn a total of  463,290  from holding DAX Index or generate 31.32% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy0.0%
ValuesDaily Returns

DAX Index  vs.  KCAP FINANCIAL

 Performance 
       Timeline  

DAX Index and KCAP FINANCIAL Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with DAX Index and KCAP FINANCIAL

The main advantage of trading using opposite DAX Index and KCAP FINANCIAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DAX Index position performs unexpectedly, KCAP FINANCIAL 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 KCAP FINANCIAL will offset losses from the drop in KCAP FINANCIAL's long position.
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The idea behind DAX Index and KCAP FINANCIAL 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.

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