Correlation Between DAX Index and SHIMANO INC

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Can any of the company-specific risk be diversified away by investing in both DAX Index and SHIMANO 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 SHIMANO 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 SHIMANO INC UNSPADR10, you can compare the effects of market volatilities on DAX Index and SHIMANO 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 SHIMANO INC. Check out your portfolio center. Please also check ongoing floating volatility patterns of DAX Index and SHIMANO INC.

Diversification Opportunities for DAX Index and SHIMANO INC

-0.51
  Correlation Coefficient

Excellent diversification

The 3 months correlation between DAX and SHIMANO is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding DAX Index and SHIMANO INC UNSPADR10 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SHIMANO INC UNSPADR10 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 SHIMANO INC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SHIMANO INC UNSPADR10 has no effect on the direction of DAX Index i.e., DAX Index and SHIMANO INC go up and down completely randomly.
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Pair Corralation between DAX Index and SHIMANO INC

Assuming the 90 days trading horizon DAX Index is expected to generate 0.3 times more return on investment than SHIMANO INC. However, DAX Index is 3.33 times less risky than SHIMANO INC. It trades about 0.1 of its potential returns per unit of risk. SHIMANO INC UNSPADR10 is currently generating about -0.07 per unit of risk. If you would invest  1,925,497  in DAX Index on September 2, 2024 and sell it today you would earn a total of  37,148  from holding DAX Index or generate 1.93% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

DAX Index  vs.  SHIMANO INC UNSPADR10

 Performance 
       Timeline  

DAX Index and SHIMANO INC Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with DAX Index and SHIMANO INC

The main advantage of trading using opposite DAX Index and SHIMANO INC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DAX Index position performs unexpectedly, SHIMANO 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 SHIMANO INC will offset losses from the drop in SHIMANO INC's long position.
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The idea behind DAX Index and SHIMANO INC UNSPADR10 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.

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