Correlation Between DAX Index and Davide Campari

Can any of the company-specific risk be diversified away by investing in both DAX Index and Davide Campari 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 Davide Campari into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between DAX Index and Davide Campari Milano, you can compare the effects of market volatilities on DAX Index and Davide Campari 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 Davide Campari. Check out your portfolio center. Please also check ongoing floating volatility patterns of DAX Index and Davide Campari.

Diversification Opportunities for DAX Index and Davide Campari

-0.23

Correlation Coefficient

DAX Index  Davide Campari

Very good diversification

The 3 months correlation between DAX and Davide is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding DAX Index and Davide Campari Milano in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Davide Campari Milano 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 Davide Campari. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Davide Campari Milano has no effect on the direction of DAX Index i.e., DAX Index and Davide Campari go up and down completely randomly.

Pair Corralation between DAX Index and Davide Campari

Assuming the 90 days trading horizon DAX Index is expected to generate 0.23 times more return on investment than Davide Campari. However, DAX Index is 4.38 times less risky than Davide Campari. It trades about 0.07 of its potential returns per unit of risk. Davide Campari Milano is currently generating about -0.09 per unit of risk. If you would invest  1,923,836  in DAX Index on September 26, 2024 and sell it today you would earn a total of  61,041  from holding DAX Index or generate 3.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

DAX Index  vs.  Davide Campari Milano

Pair Trading with DAX Index and Davide Campari

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

The idea behind DAX Index and Davide Campari Milano 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.