Correlation Between Deutsche Boerse and AIA Group

Can any of the company-specific risk be diversified away by investing in both Deutsche Boerse and AIA Group 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 Deutsche Boerse and AIA Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Deutsche Boerse AG and AIA Group Ltd, you can compare the effects of market volatilities on Deutsche Boerse and AIA Group 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 Deutsche Boerse with a short position of AIA Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deutsche Boerse and AIA Group.

Diversification Opportunities for Deutsche Boerse and AIA Group

0.33

Correlation Coefficient

Deutsche Boerse  AIA Group

Weak diversification

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

Pair Corralation between Deutsche Boerse and AIA Group

Assuming the 90 days horizon Deutsche Boerse AG is expected to generate 0.4 times more return on investment than AIA Group. However, Deutsche Boerse AG is 2.47 times less risky than AIA Group. It trades about 0.0 of its potential returns per unit of risk. AIA Group Ltd is currently generating about -0.02 per unit of risk. If you would invest  2,320  in Deutsche Boerse AG on September 20, 2024 and sell it today you would lose (15.00) from holding Deutsche Boerse AG or give up 0.65% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Deutsche Boerse AG  vs.  AIA Group Ltd

Deutsche Boerse AG

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Deutsche Boerse AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Deutsche Boerse is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

AIA Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AIA Group Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward indicators, AIA Group is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Deutsche Boerse and AIA Group

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

The idea behind Deutsche Boerse AG and AIA Group 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.