Correlation Between DAX Index and NATION MEDIA

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

Diversification Opportunities for DAX Index and NATION MEDIA

-0.06
  Correlation Coefficient

Good diversification

The 3 months correlation between DAX and NATION is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding DAX Index and NATION MEDIA GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NATION MEDIA GROUP 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 NATION MEDIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NATION MEDIA GROUP has no effect on the direction of DAX Index i.e., DAX Index and NATION MEDIA go up and down completely randomly.
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Pair Corralation between DAX Index and NATION MEDIA

Assuming the 90 days trading horizon DAX Index is expected to generate 0.32 times more return on investment than NATION MEDIA. However, DAX Index is 3.14 times less risky than NATION MEDIA. It trades about 0.08 of its potential returns per unit of risk. NATION MEDIA GROUP is currently generating about 0.0 per unit of risk. If you would invest  1,446,020  in DAX Index on September 4, 2024 and sell it today you would earn a total of  547,342  from holding DAX Index or generate 37.85% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy97.03%
ValuesDaily Returns

DAX Index  vs.  NATION MEDIA GROUP

 Performance 
       Timeline  

DAX Index and NATION MEDIA Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with DAX Index and NATION MEDIA

The main advantage of trading using opposite DAX Index and NATION MEDIA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DAX Index position performs unexpectedly, NATION MEDIA 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 NATION MEDIA will offset losses from the drop in NATION MEDIA's long position.
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The idea behind DAX Index and NATION MEDIA GROUP 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.

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