Correlation Between Deutsche Boerse and Japan Exchange

Can any of the company-specific risk be diversified away by investing in both Deutsche Boerse and Japan Exchange 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 Japan Exchange 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 Japan Exchange Group, you can compare the effects of market volatilities on Deutsche Boerse and Japan Exchange 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 Japan Exchange. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deutsche Boerse and Japan Exchange.

Diversification Opportunities for Deutsche Boerse and Japan Exchange

0.39

Correlation Coefficient

Deutsche Boerse  Japan Exchange

Weak diversification

The 3 months correlation between Deutsche and Japan is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Boerse AG and Japan Exchange Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Exchange 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 Japan Exchange. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Exchange Group has no effect on the direction of Deutsche Boerse i.e., Deutsche Boerse and Japan Exchange go up and down completely randomly.

Pair Corralation between Deutsche Boerse and Japan Exchange

Assuming the 90 days horizon Deutsche Boerse is expected to generate 1.55 times less return on investment than Japan Exchange. But when comparing it to its historical volatility, Deutsche Boerse AG is 1.34 times less risky than Japan Exchange. It trades about 0.06 of its potential returns per unit of risk. Japan Exchange Group is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  690.00  in Japan Exchange Group on September 20, 2024 and sell it today you would earn a total of  455.00  from holding Japan Exchange Group or generate 65.94% return on investment over 90 days.

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

Deutsche Boerse AG  vs.  Japan Exchange Group

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 current stock price disturbance, may contribute to short-term losses for the investors.

Japan Exchange Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Japan Exchange Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Japan Exchange 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 Japan Exchange

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

The idea behind Deutsche Boerse AG and Japan Exchange Group 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.