Correlation Between Deutsche Boerse and London Stock
Can any of the company-specific risk be diversified away by investing in both Deutsche Boerse and London Stock 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 Deutsche Boerse and London Stock into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Deutsche Boerse AG and London Stock Exchange, you can compare the effects of market volatilities on Deutsche Boerse and London Stock 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 Deutsche Boerse with a short position of London Stock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deutsche Boerse and London Stock.
Diversification Opportunities for Deutsche Boerse and London Stock
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between Deutsche and London is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Boerse AG and London Stock Exchange in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on London Stock Exchange and Deutsche Boerse 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 Deutsche Boerse AG are associated (or correlated) with London Stock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of London Stock Exchange has no effect on the direction of Deutsche Boerse i.e., Deutsche Boerse and London Stock go up and down completely randomly.
Pair Corralation between Deutsche Boerse and London Stock
Assuming the 90 days horizon Deutsche Boerse AG is expected to generate 0.94 times more return on investment than London Stock. However, Deutsche Boerse AG is 1.06 times less risky than London Stock. It trades about -0.1 of its potential returns per unit of risk. London Stock Exchange is currently generating about -0.39 per unit of risk. If you would invest 2,009 in Deutsche Boerse AG on January 20, 2024 and sell it today you would lose (30.00) from holding Deutsche Boerse AG or give up 1.49% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Deutsche Boerse AG vs. London Stock Exchange
Performance |
| Timeline |
| Deutsche Boerse AG |
| London Stock Exchange |
Deutsche Boerse and London Stock Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Deutsche Boerse and London Stock
The main advantage of trading using opposite Deutsche Boerse and London Stock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deutsche Boerse position performs unexpectedly, London Stock 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 London Stock will offset losses from the drop in London Stock's long position.| Deutsche Boerse vs. MSCI Inc | Deutsche Boerse vs. Otc Markets Group | Deutsche Boerse vs. Dun Bradstreet Holdings |
Check out your portfolio center.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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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