Correlation Between Japan Exchange and Deutsche Boerse

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

By analyzing existing cross correlation between Japan Exchange Group and Deutsche Boerse AG, you can compare the effects of market volatilities on Japan Exchange and Deutsche Boerse 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 Japan Exchange with a short position of Deutsche Boerse. Check out your portfolio center. Please also check ongoing floating volatility patterns of Japan Exchange and Deutsche Boerse.

Diversification Opportunities for Japan Exchange and Deutsche Boerse

0.35

Correlation Coefficient

Japan Exchange  Deutsche Boerse

Weak diversification

The 3 months correlation between Japan and Deutsche is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Japan Exchange Group and Deutsche Boerse AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Boerse AG and Japan Exchange 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 Japan Exchange Group are associated (or correlated) with Deutsche Boerse. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Boerse AG has no effect on the direction of Japan Exchange i.e., Japan Exchange and Deutsche Boerse go up and down completely randomly.

Pair Corralation between Japan Exchange and Deutsche Boerse

Assuming the 90 days horizon Japan Exchange Group is expected to under-perform the Deutsche Boerse. In addition to that, Japan Exchange is 1.8 times more volatile than Deutsche Boerse AG. It trades about -0.05 of its total potential returns per unit of risk. Deutsche Boerse AG is currently generating about 0.0 per unit of volatility. If you would invest  2,320  in Deutsche Boerse AG on September 20, 2024 and sell it today you would lose (15.00) from holding Deutsche Boerse AG or give up 0.65% of portfolio value over 90 days.

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

Japan Exchange Group  vs.  Deutsche Boerse AG

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

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

Pair Trading with Japan Exchange and Deutsche Boerse

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

The idea behind Japan Exchange Group and Deutsche Boerse AG 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..