Correlation Between DAX Index and UNITED INVESTMENTS

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

Diversification Opportunities for DAX Index and UNITED INVESTMENTS

-0.27
  Correlation Coefficient

Very good diversification

The 3 months correlation between DAX and UNITED is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding DAX Index and UNITED INVESTMENTS LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNITED INVESTMENTS LTD 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 UNITED INVESTMENTS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UNITED INVESTMENTS LTD has no effect on the direction of DAX Index i.e., DAX Index and UNITED INVESTMENTS go up and down completely randomly.
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Pair Corralation between DAX Index and UNITED INVESTMENTS

Assuming the 90 days trading horizon DAX Index is expected to generate 0.27 times more return on investment than UNITED INVESTMENTS. However, DAX Index is 3.64 times less risky than UNITED INVESTMENTS. It trades about 0.14 of its potential returns per unit of risk. UNITED INVESTMENTS LTD is currently generating about -0.14 per unit of risk. If you would invest  1,907,754  in DAX Index on September 1, 2024 and sell it today you would earn a total of  54,891  from holding DAX Index or generate 2.88% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy95.45%
ValuesDaily Returns

DAX Index  vs.  UNITED INVESTMENTS LTD

 Performance 
       Timeline  

DAX Index and UNITED INVESTMENTS Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with DAX Index and UNITED INVESTMENTS

The main advantage of trading using opposite DAX Index and UNITED INVESTMENTS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DAX Index position performs unexpectedly, UNITED INVESTMENTS 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 UNITED INVESTMENTS will offset losses from the drop in UNITED INVESTMENTS's long position.
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The idea behind DAX Index and UNITED INVESTMENTS LTD 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.

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