Correlation Between DAX Index and Carrefour

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

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

Diversification Opportunities for DAX Index and Carrefour

-0.71

Correlation Coefficient

DAX Index  Carrefour

Pay attention - limited upside

The 3 months correlation between DAX and Carrefour is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding DAX Index and Carrefour SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carrefour SA 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 Carrefour. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carrefour SA has no effect on the direction of DAX Index i.e., DAX Index and Carrefour go up and down completely randomly.

Pair Corralation between DAX Index and Carrefour

Assuming the 90 days trading horizon DAX Index is expected to generate 0.45 times more return on investment than Carrefour. However, DAX Index is 2.2 times less risky than Carrefour. It trades about 0.1 of its potential returns per unit of risk. Carrefour SA is currently generating about -0.04 per unit of risk. If you would invest  1,640,476  in DAX Index on September 28, 2024 and sell it today you would earn a total of  344,401  from holding DAX Index or generate 20.99% return on investment over 90 days.

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

DAX Index  vs.  Carrefour SA

Pair Trading with DAX Index and Carrefour

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

The idea behind DAX Index and Carrefour SA 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.