Correlation Between DAX Index and Murata Manufacturing

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

Diversification Opportunities for DAX Index and Murata Manufacturing

-0.35
  Correlation Coefficient

Very good diversification

The 3 months correlation between DAX and Murata is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding DAX Index and Murata Manufacturing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Murata Manufacturing 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 Murata Manufacturing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Murata Manufacturing has no effect on the direction of DAX Index i.e., DAX Index and Murata Manufacturing go up and down completely randomly.
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Pair Corralation between DAX Index and Murata Manufacturing

Assuming the 90 days trading horizon DAX Index is expected to generate 0.42 times more return on investment than Murata Manufacturing. However, DAX Index is 2.36 times less risky than Murata Manufacturing. It trades about 0.08 of its potential returns per unit of risk. Murata Manufacturing Co is currently generating about 0.0 per unit of risk. If you would invest  1,444,761  in DAX Index on August 24, 2024 and sell it today you would earn a total of  487,498  from holding DAX Index or generate 33.74% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

DAX Index  vs.  Murata Manufacturing Co

 Performance 
       Timeline  

DAX Index and Murata Manufacturing Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with DAX Index and Murata Manufacturing

The main advantage of trading using opposite DAX Index and Murata Manufacturing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DAX Index position performs unexpectedly, Murata Manufacturing 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 Murata Manufacturing will offset losses from the drop in Murata Manufacturing's long position.
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The idea behind DAX Index and Murata Manufacturing 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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