Correlation Between Montauk Renewables and DAX

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Montauk Renewables and DAX 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 Montauk Renewables and DAX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Montauk Renewables and DAX, you can compare the effects of market volatilities on Montauk Renewables and DAX 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 Montauk Renewables with a short position of DAX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Montauk Renewables and DAX.

Diversification Opportunities for Montauk Renewables and DAX

-0.62
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Montauk and DAX is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Montauk Renewables and DAX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DAX and Montauk Renewables 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 Montauk Renewables are associated (or correlated) with DAX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DAX has no effect on the direction of Montauk Renewables i.e., Montauk Renewables and DAX go up and down completely randomly.
    Optimize

Pair Corralation between Montauk Renewables and DAX

Given the investment horizon of 90 days Montauk Renewables is expected to generate 3.06 times more return on investment than DAX. However, Montauk Renewables is 3.06 times more volatile than DAX. It trades about 0.04 of its potential returns per unit of risk. DAX is currently generating about -0.02 per unit of risk. If you would invest  990.00  in Montauk Renewables on August 28, 2022 and sell it today you would earn a total of  298.00  from holding Montauk Renewables or generate 30.1% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy70.32%
ValuesDaily Returns

Montauk Renewables  vs.  DAX

 Performance (%) 
       Timeline  

Montauk Renewables and DAX Volatility Contrast

   Predicted Return Density   
       Returns  

Montauk Renewables

Pair trading matchups for Montauk Renewables

DAX

Pair trading matchups for DAX

The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against DAX as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. DAX's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, DAX's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to DAX.

Pair Trading with Montauk Renewables and DAX

The main advantage of trading using opposite Montauk Renewables and DAX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Montauk Renewables position performs unexpectedly, DAX 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 DAX will offset losses from the drop in DAX's long position.
Montauk Renewables vs. Sempra
The idea behind Montauk Renewables and DAX 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.
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against DAX as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. DAX's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, DAX's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to DAX.
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.

Other Complementary Tools

Alpha Finder
Use alpha and beta coefficients to find investment opportunities after accounting for the risk
Go
Price Transformation
Use Price Transformation models to analyze depth of different equity instruments across global markets
Go
Options Analysis
Analyze and evaluate options and option chains as a potential hedge for your portfolios
Go
Insider Screener
Find insiders across different sectors to evaluate their impact on performance
Go
Theme Ratings
Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance
Go
Headlines Timeline
Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity
Go