Correlation Between DAX Index and MODIVCARE INC

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Can any of the company-specific risk be diversified away by investing in both DAX Index and MODIVCARE INC 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 MODIVCARE INC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DAX Index and MODIVCARE INC DL 001, you can compare the effects of market volatilities on DAX Index and MODIVCARE INC 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 MODIVCARE INC. Check out your portfolio center. Please also check ongoing floating volatility patterns of DAX Index and MODIVCARE INC.

Diversification Opportunities for DAX Index and MODIVCARE INC

0.06
  Correlation Coefficient

Significant diversification

The 3 months correlation between DAX and MODIVCARE is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding DAX Index and MODIVCARE INC DL 001 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MODIVCARE INC DL 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 MODIVCARE INC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MODIVCARE INC DL has no effect on the direction of DAX Index i.e., DAX Index and MODIVCARE INC go up and down completely randomly.
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Pair Corralation between DAX Index and MODIVCARE INC

Assuming the 90 days trading horizon DAX Index is expected to generate 4.72 times less return on investment than MODIVCARE INC. But when comparing it to its historical volatility, DAX Index is 4.16 times less risky than MODIVCARE INC. It trades about 0.26 of its potential returns per unit of risk. MODIVCARE INC DL 001 is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  1,410  in MODIVCARE INC DL 001 on September 12, 2024 and sell it today you would earn a total of  340.00  from holding MODIVCARE INC DL 001 or generate 24.11% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

DAX Index  vs.  MODIVCARE INC DL 001

 Performance 
       Timeline  

DAX Index and MODIVCARE INC Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with DAX Index and MODIVCARE INC

The main advantage of trading using opposite DAX Index and MODIVCARE INC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DAX Index position performs unexpectedly, MODIVCARE INC 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 MODIVCARE INC will offset losses from the drop in MODIVCARE INC's long position.
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The idea behind DAX Index and MODIVCARE INC DL 001 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.

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