The correlation between different currency pairs and indexes can range between -1 to +1, and if the two instruments advance in the same direction, that’s an indicator of an ideal positive correlation. On the other hand, an ideal negative correlation would mean that the pairs or indexes will always advance in the opposite direction. Finally, if the correlation coefficient is 0, the directions of two currency pairs or indexes are completely independent. For example, if the Euro is falling sharply, the DAX will likely rise, but not as sharply. Also, when developing your correlation strategy, keep in mind that correlations sometimes can fade unexpectedly.

  1. These companies represent different industries, including automotive, technology, pharmaceuticals, and finance.
  2. The index tracks the performance of Germany’s 40 biggest companies by order book volume and market capitalisation.
  3. According to Blackwell Global, the DAX 40 has a more than 90% correlation with major US stock indices and a 70% inverse correlation to the Euro.
  4. Another interesting fact is that the DAX is quite responsive to the European Central Bank or ECB policies.

We advise you to carefully consider whether trading is appropriate for you based on your personal circumstances. It is not a solicitation or a recommendation to trade derivatives contracts or securities and should not be construed or interpreted as financial advice. Any examples given are provided for illustrative purposes only and no representation is being made that any person will, or is likely to, achieve profits or losses similar to those examples. DailyFX Limited is not responsible for any trading decisions taken by persons not intended to view this material. The DAX Stock Index, also known simply as “DAX,” is the primary stock index in Germany.

At that time, the DAX companies made up around 75% of the total market capitalization of the entire Frankfurt Exchange. For example, Bayer AG is a pharmaceutical and consumer health company founded in 1863 and is well-known for its pain and allergy-relief products. Allianz SE is a global financial services company that focuses on providing customers with insurance and asset management products. Adidas AG develops, manufactures, and markets popular athletic footwear, apparel, and equipment. DAX member companies represent roughly 80% of the aggregate market capitalization that trades on the Frankfurt Exchange. The index was historically comprised of 30 companies but was expanded to 40 as of Sept. 3, 2021.

According to Blackwell Global, the DAX 40 has a more than 90% correlation with major US stock indices and a 70% inverse correlation to the Euro. For instance, if the EUR/USD currency pair advances, the DAX index usually depreciates, and on the other hand, when the Euro depreciates against USD, the DAX moves up. This phenomenon  is used by traders to develop a successful trading strategy. Another interesting fact is that the DAX is quite responsive to the European Central Bank or ECB policies. This is because the correlation strategy helps mitigate risk since you’re making decisions based on proper information.

DAX Member Companies

An index is a method of tracking the performance of a group of assets with prices in a standardized way. Some examples include the Consumer Price Index (CPI), which is a basket of general consumer goods weighted into an index and is used to measure inflation over time. In a different twist from most indices, the DAX is updated with futures prices for the next day, even after the main stock exchange has closed. Changes are made on regular review dates, but index members can be removed if they no longer rank in the top 45 largest companies, or added if they break the top 25.

Understanding the DAX Stock Index

Make sure you are ahead of every market move with our constantly updated economic calendar. What might happen from here is that the buyers will look to take out the February all-time https://www.forex-world.net/currency-pairs/eur-nok/ high and eventually push the price above 14,000. In this regard, the bulls may look for a move to 14,500, where the 127.2% Fibonacci extension of the 2018 retracement is located.

The DAX—also known as the Deutscher Aktien Index or the GER40—is a stock index that represents 40 of the largest and most liquid German companies that trade on the Frankfurt Exchange. The prices used to calculate the DAX Index come through Xetra, an electronic trading system. A free-float methodology is used to calculate the index weightings along with a measure of the average trading volume. Leveraged trading in foreign currency or off-exchange products on margin carries significant risk and may not be suitable for all investors.

Most stock indexes impose various requirements and hurdles that need to be cleared to be eligible to be listed on the index. For example, the S&P 500 Index – which is one of the most reputable U.S. indexes, requires companies to post four straight quarters of profitability before being considered eligible to be listed in the index. Alternatively, a more positive global risk sentiment may yield a trading environment that is bullish for European indices. In this case, the bulls would look to push the DAX 30 towards 15,300 where the 127.2% Fibonacci extension resistance of the coronavirus-fueled market retracement sits. Over 1.8 million professionals use CFI to learn accounting, financial analysis, modeling and more.

Start with a free account to explore 20+ always-free courses and hundreds of finance templates and cheat sheets. As a blue-chip stock market index, the DAX is very similar to the Dow Jones Industrial Average (DJIA), which also tracks large, publicly owned companies. The vast majority of shares on the Frankfurt Exchange now trade on the all-electronic Xetra system, with a near-95% adoption rate for the stocks of the 40 DAX members. Stay updated on the latest financial news and trends in the world of finance. The DAX Stock Index is calculated based on the free-float adjusted market-cap weighted index methodology. Companies that are listed on the DAX are multinational companies that operate in multiple countries beyond just Germany.

Price history

However, they play a large role in terms of making up a significant portion of Germany’s gross domestic product (GDP). Get virtual funds, test your strategy and prove your skills in real market conditions. Join thousands of traders who choose a mobile-first broker for trading the markets. Harness past market data https://www.topforexnews.org/investing/why-invest-in-airline-stocks/ to forecast price direction and anticipate market moves. The DAX Stock Index is a very concentrated index holding only blue-chip companies that are very large and successful. It is very similar to the Dow Jones Industrial Average (DJIA), which is a price-weighted index that includes 30 very large U.S. companies.

Instead, traders speculate on whichever direction the price will move in the future. Leverage is a key element of spread betting, as it allows traders to increase market exposure. Hence, investors tend to leverage DAX to potentially magnify profits, but also losses. For this reason, it is important to create a sustainable risk management strategy, bearing in mind the amount of capital that you are putting at risk. The DAX index, which tracks 40 large and actively traded German companies, is considered by many analysts to be a gauge for Germany’s economic health.

Created and maintained by Deutsche Börse, it represents the performance of the top 30 blue-chip companies traded on the Frankfurt Stock Exchange. These companies cover various sectors and industries, providing investors with a comprehensive overview of the German market. The DAX Index is frequently used as a benchmark to evaluate the overall health and performance of the German stock market. The DAX Index tracks 30 large and actively-traded German companies within the Frankfurt Exchange, which is the largest financial exchange in Germany. The DAX is the most prominent stock index for Germany, and it is considered to be a proxy for the performance of the German economy and market conditions. To be included in the DAX 40, a company must first be listed in the Prime Standard segment on the Frankfurt Stock Exchange.

Understanding the DAX Stock Index: Definition and Member Companies

Key pivot points and support and resistance provide further insights to help you trade DAX. Like other blue-chip indices, the DAX Index is also weighted by market cap, so companies with higher market caps have more influence how to use moving averages to trade cryptocurrency on its value. The prices used to compute the index come from Xetra, an electronic trading system. The index tracks the performance of Germany’s 40 biggest companies by order book volume and market capitalisation.

Some of the notable member companies include German giants such as Volkswagen, Siemens, Bayer, and Deutsche Bank. These companies represent different industries, including automotive, technology, pharmaceuticals, and finance. The presence of such renowned and influential companies on the DAX Index enhances its reputation and relevance in the global financial market.