Correlation Between TMX GROUP and DEUTSCHE BOERSE

Can any of the company-specific risk be diversified away by investing in both TMX GROUP and DEUTSCHE BOERSE 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 TMX GROUP and DEUTSCHE BOERSE into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between TMX GROUP LTD and DEUTSCHE BOERSE ADR, you can compare the effects of market volatilities on TMX GROUP and DEUTSCHE BOERSE 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 TMX GROUP with a short position of DEUTSCHE BOERSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of TMX GROUP and DEUTSCHE BOERSE.

Diversification Opportunities for TMX GROUP and DEUTSCHE BOERSE

0.33

Correlation Coefficient

TMX GROUP  DEUTSCHE BOERSE

Weak diversification

The 3 months correlation between TMX and DEUTSCHE is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding TMX GROUP LTD and DEUTSCHE BOERSE ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DEUTSCHE BOERSE ADR and TMX GROUP 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 TMX GROUP LTD are associated (or correlated) with DEUTSCHE BOERSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DEUTSCHE BOERSE ADR has no effect on the direction of TMX GROUP i.e., TMX GROUP and DEUTSCHE BOERSE go up and down completely randomly.

Pair Corralation between TMX GROUP and DEUTSCHE BOERSE

Assuming the 90 days horizon TMX GROUP is expected to generate 1.86 times less return on investment than DEUTSCHE BOERSE. In addition to that, TMX GROUP is 2.06 times more volatile than DEUTSCHE BOERSE ADR. It trades about 0.03 of its total potential returns per unit of risk. DEUTSCHE BOERSE ADR is currently generating about 0.12 per unit of volatility. If you would invest  2,060  in DEUTSCHE BOERSE ADR on September 27, 2024 and sell it today you would earn a total of  160.00  from holding DEUTSCHE BOERSE ADR or generate 7.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

TMX GROUP LTD  vs.  DEUTSCHE BOERSE ADR

TMX GROUP LTD

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in TMX GROUP LTD are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, TMX GROUP is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

DEUTSCHE BOERSE ADR

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DEUTSCHE BOERSE ADR are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, DEUTSCHE BOERSE may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with TMX GROUP and DEUTSCHE BOERSE

The main advantage of trading using opposite TMX GROUP and DEUTSCHE BOERSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TMX GROUP position performs unexpectedly, DEUTSCHE BOERSE 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 BOERSE will offset losses from the drop in DEUTSCHE BOERSE's long position.

The idea behind TMX GROUP LTD and DEUTSCHE BOERSE ADR 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.