Glossary

Correlation coefficient

Measurement of the degree of association between the development of two variables, e.g., a stock and an index, whether the correlation between them is positive or negative, and the probability that the price of the stock will develop parallel to the index

The value of the correlation coefficient ranges between -1 and +1. If the correlation coefficient of a stock to an index is +1, then the price of the stock always changes by the same percentage as the index; i.e., the development of the two variables is exactly parallel. In this special case, the stock has a beta factor of 1. The smaller the coefficient, the weaker the correlation. A correlation coefficient of zero indicates that movements in the price of the stock are completely unrelated to those of the index. If the correlation coefficient is negative, then the stock price and the index move in opposite directions.

Deutsche Börse AG calculates the correlation coefficients of the shares in DAX® and MDAX® in relation to their respective index. The correlation of sector indices to CDAX® are also calculated.

Also see:  Beta factor, CDAX, DAX, Index, MDAX
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