Correlation Between London Stock and Deutsche Börse
Can any of the company-specific risk be diversified away by investing in both London Stock and Deutsche Börse 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 London Stock and Deutsche Börse into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between London Stock Exchange and Deutsche Brse AG, you can compare the effects of market volatilities on London Stock and Deutsche Börse 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 London Stock with a short position of Deutsche Börse. Check out your portfolio center. Please also check ongoing floating volatility patterns of London Stock and Deutsche Börse.
Diversification Opportunities for London Stock and Deutsche Börse
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between London and Deutsche is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding London Stock Exchange and Deutsche Brse AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Brse AG and London Stock 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 London Stock Exchange are associated (or correlated) with Deutsche Börse. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Brse AG has no effect on the direction of London Stock i.e., London Stock and Deutsche Börse go up and down completely randomly.
Pair Corralation between London Stock and Deutsche Börse
Assuming the 90 days trading horizon London Stock Exchange is expected to generate 1.73 times more return on investment than Deutsche Börse. However, London Stock is 1.73 times more volatile than Deutsche Brse AG. It trades about 0.09 of its potential returns per unit of risk. Deutsche Brse AG is currently generating about 0.13 per unit of risk. If you would invest 11,161 in London Stock Exchange on September 5, 2024 and sell it today you would earn a total of 2,439 from holding London Stock Exchange or generate 21.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
London Stock Exchange vs. Deutsche Brse AG
Performance |
| Timeline |
| London Stock Exchange |
| Deutsche Brse AG |
London Stock and Deutsche Börse Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with London Stock and Deutsche Börse
The main advantage of trading using opposite London Stock and Deutsche Börse positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if London Stock position performs unexpectedly, Deutsche Börse 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 Deutsche Börse will offset losses from the drop in Deutsche Börse's long position.| London Stock vs. Rayonier Advanced Materials | London Stock vs. Mobilezone Holding AG | London Stock vs. Goodyear Tire Rubber | London Stock vs. NURAN WIRELESS INC |
| Deutsche Börse vs. TOREX SEMICONDUCTOR LTD | Deutsche Börse vs. Vastned Retail NV | Deutsche Börse vs. Canon Marketing Japan | Deutsche Börse vs. SIDETRADE EO 1 |
Check out your portfolio center.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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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