Correlation Between DAX Index and Cboe Global

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Can any of the company-specific risk be diversified away by investing in both DAX Index and Cboe Global 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 Cboe Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DAX Index and Cboe Global Markets, you can compare the effects of market volatilities on DAX Index and Cboe Global 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 Cboe Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of DAX Index and Cboe Global.

Diversification Opportunities for DAX Index and Cboe Global

0.32
  Correlation Coefficient

Weak diversification

The 3 months correlation between DAX and Cboe is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding DAX Index and Cboe Global Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cboe Global Markets 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 Cboe Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cboe Global Markets has no effect on the direction of DAX Index i.e., DAX Index and Cboe Global go up and down completely randomly.
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Pair Corralation between DAX Index and Cboe Global

Assuming the 90 days trading horizon DAX Index is expected to generate 0.5 times more return on investment than Cboe Global. However, DAX Index is 1.99 times less risky than Cboe Global. It trades about 0.16 of its potential returns per unit of risk. Cboe Global Markets is currently generating about -0.01 per unit of risk. If you would invest  1,871,149  in DAX Index on September 18, 2024 and sell it today you would earn a total of  160,232  from holding DAX Index or generate 8.56% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy98.46%
ValuesDaily Returns

DAX Index  vs.  Cboe Global Markets

 Performance 
       Timeline  

DAX Index and Cboe Global Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with DAX Index and Cboe Global

The main advantage of trading using opposite DAX Index and Cboe Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DAX Index position performs unexpectedly, Cboe Global 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 Cboe Global will offset losses from the drop in Cboe Global's long position.
The idea behind DAX Index and Cboe Global Markets 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.

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