Correlation Between DAX Index and Crown Castle

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

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

Diversification Opportunities for DAX Index and Crown Castle

-0.26

Correlation Coefficient

DAX Index  Crown Castle

Very good diversification

The 3 months correlation between DAX and Crown is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding DAX Index and Crown Castle International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crown Castle Interna 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 Crown Castle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crown Castle Interna has no effect on the direction of DAX Index i.e., DAX Index and Crown Castle go up and down completely randomly.

Pair Corralation between DAX Index and Crown Castle

Assuming the 90 days trading horizon DAX Index is expected to generate 0.54 times more return on investment than Crown Castle. However, DAX Index is 1.85 times less risky than Crown Castle. It trades about 0.09 of its potential returns per unit of risk. Crown Castle International is currently generating about 0.03 per unit of risk. If you would invest  1,874,711  in DAX Index on September 3, 2024 and sell it today you would earn a total of  87,934  from holding DAX Index or generate 4.69% 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.  Crown Castle International

Pair Trading with DAX Index and Crown Castle

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

The idea behind DAX Index and Crown Castle International 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.