In this article at Aron Groups broker, we will talk about the DAX 40, which is also known as the DAX index. DAX is a stock index belonging to Germany that provides information about the most prominent German companies listed on the Frankfort Stock Exchange. DAX is considered one of the most reliable indicators of Germany’s economic health and strengths. In the following, we will talk about this Benchmark to help you understand it better and use it wisely in your currency pair trades.
Table of Contents
What is the DAX 40?
The DAX 40 is one of the leading stock indexes of Europe, and then you hear analysts talking about the strength of the economy of the whole of Europe. The first index to be analyzed is DAX 40. DAX is the most prominent index in Germany that is widely used, and investors from all around the world try to study and examine it. DAX—also known as the Deutscher Aktien Index or the GER40, is the index representing 40 of the largest German companies that are listed on the Frankfurt Exchange.
The index was created back in 1988 by the Frankfurt Stock Exchange to represent the 40 largest companies listed on this exchange based on market capitalization. The price of DAX40 has been computed for over 17 years by the Xetra platform. Xetra is a reference market for exchange trading in Germany. It’s interesting to know that at first, the name was DAX 30, as there were only 30 companies listed in this index in September 2021; it became DAX 40.
Installing the index, you will find big names, including Airbus, Zalando, Siemens Healthineers, HelloFresh, Symrise, Sartorius, Porsche Automobile Holding, Brenntag, Puma, and Qiagen, which are the most prominent and influential companies in the whole of Germany. The DAX40 Is a performance-based index that incorporates information on company dividends, capital income, and cash outflow, the elements influencing The Net stock price of each company. There are other blue-chip stock indexes like CAC 40 in France, FTSE 100 in the United Kingdom, and the S&P 500 index in the United States. But usually, traders are familiar with the S&P 500 index.
Since its inception, the DAX 40 has been a perfect representative for indicates during major economic events in history.
The history of DAX40
In the tech bubble in 2000, the DAX 40 was a perfect representative of the German economy. DAX 40 experienced significant lows in 2003 and large volatility over in subsequent years. The index plunged in 2008 simultaneously with the global financial crisis and another disaster happened during the global COVID-19 outbreak. The DAX 40 went from 13,800 to 8,250, which represents a 40% drop.
How is the DAX 40 calculated?
In order to calculate the index, you should use the free-float methodology, which means you have only to consider the readily available shares of companies, so you cannot consider tradable shares of a company when Computing the DAX 40. For example, shows that are owned by the government or not considered in DAX 40 calculation.
Just like any underlying asset and indicates the DAX 40 is valued by market capitalization, significant companies with large market capitalization have more influence on the value of the index. As we have said earlier, Xetra has been used to calculate their index for years, which is an electronic trading system that tracks the performance of Germany’s 40 biggest companies.
What are the DAX trading hours?
The DAX It starts from 9:00 a.m. to 5:30 p.m. Future contracts are traded on the EUREX exchange from 1:10 to 22:00. If you are using the MT4 platform to trade Forex with Aron Groups, you can trade the DAX30.fs product from 02:15 to 22:59 (server time).
DAX Components
In the following, we’ll talk about some of the most famous German companies in the DAX :
Adidas AG (ETR: ADS)
Adidas is a famous clothing company that initially belonged to Germany, and its headquarters are in Herzogenaurach.
Airbus SE (EPA: AIR)
Airbus is an international Pioneer in crafting aerospace, which is known to design and deliver leading industrial aircraft and provide to the world.
BASF SE (ETR: BAS)
BASF SE is a chemical company that has more than 390 production plans around the world.
Bayer AG (ETR: BAYN)
Bayer AG is a pharmaceutical company responsible for producing some of the most well-known painkillers drugs.
Bayerische Motoren Werke AG (ETR: BMW)
No need to introduce a BMW is, the world’s prominent automaker that’s designed and produced a number of award-winning models.
Deutsche Bank AG
Deutsche Bank AG Is one of the largest banks in the world, which has branches in 58 countries all around Europe, Asia, and America.
Siemens AG (ETR: SIE) (NYSE: SI)
Siemens is an electrical engineering company that is active in different Industries.
Volkswagen AG (ETR: VOW)
Volkswagen Is another major automaker in Germany, which has been recognized as the largest automobile manufacturer by worldwide sales in 2016 and 2017.
The list doesn’t end here; in the following, we will mention the names of other major companies listed in the DAX index:
- Allianz SE (ALV:GR)
- Beiersdorf AG (BEI:GR)
- Brenntag SE (BNR:GR)
- Continental AG (CON:GR)
- Covestro AG (1COV:GR)
- Daimler AG (DAI:GR)
- Delivery Hero SE (DHER:GE)
- Deutsche Boerse AG (DB1:GR)
- Deutsche Post AG (DPW:GR)
- Deutsche Telekom AG (DTE:GR)
- ON SE (EOAN:GR)
- Fresenius Medical Care AG & Co. KGaA (FME.GR)
- Fresenius SE & Co. KGaA (FRE:GR)
- HeidelbergCement AG (HEI:GR)
- HelloFresh SE (HFG:GR)
- Henkel AG & Co. KGaA (HEN3:GR)
- Infineon Technologies AG (IFX:GR)
- Linde PLC (LIN:GR)
- Merck KGaA (MRK:GR)
- MTU Aero Engines AG (MTX:GR)
- Muenchener Rueckversicherungs-Gesellschaft AG in Muenchen (MUV2:GR)
- Porsche Automobil Holding (PAH3:GR)
- Puma SE (PUM:GR)
- Qiagen N.V. (QIA:GR)
- RWE AG (RWE:GR)
- SAP SE (SAP:GR)
- Sartorius AG Vz (SRT3:GR)
- Siemens Energy AG (ENR:GR)
- Siemens Healthineers AG (SHL:GR)
- Symrise AG (SY1:GR)
- Vonovia SE (VNA:GR)
- Zalando SE (ZAL:GR)
You might wonder what it takes for a company to be included in the DAX 40. In order for a company to be listed in the index, the company might first be listed in the prime standard segment of the Frankfurt Stock Exchange. The main difference between the companies listed in this segment and other companies is that they have to meet higher standards of transparency than other companies listed in the general standard segment.
A company can be listed on the DAX index if they are continuously trading in Xetra with a public float up at least 10%. Besides, the company should have a registered office in Germany, and most of its shares must be traded in Frankfurt. The headquarters can be located in one of the European countries.
Correlations
It is interesting to know that the DAX 40 Has a 90% correlation with United States stock indexes and a 70% correlation with the European indexes. Whenever the EUR/USD currency pair is on the rise, the DAX 40 will decline, and when the Euro is depreciated against the USD, the DAX 40 rises.
In order to understand the correlation better, let us explain it more. When the correlation ranges between -1 and + 1, the underlying assets will advance in the same direction. But if the correlation is zero, the underlying assets will performed independently. If you understand the DAX, you can use it to your advantage, and considering the correlation between this index and European and American indexes, you can build a diversified portfolio and hedge against inflation and price fluctuations. For instance, if. The DAX rises if the Euro falls, but don’t take it for granted because, as far as correlation goes, they can fade unexpectedly and surprise you.
How to trade DAX 40?
The first way to trade DAX 40 is to use Cfds, which is the cost-effective way to trade it. When dealing with Aron Groups, you can always trade indices online, and you can speculate on their prices without owning them. You can also use leverage to multiply your profits and make bigger positions.
What moves the DAX 40?
Now that you are much more familiar with the DAX 40, let us talk about the DAX 40 movers:
Economic data
It’s no surprise that the economic health and strengths of Germany will affect the domestic stock market. Considering the market capitalization, some companies will be more critical when it comes to calculating the price of the DAX 40. Any economic change in Germany, including rising interest rates, would have a huge impact on financial services companies than on others.
Earnings
Major companies publish quarterly or annual reports representing their performance and the share price of the company. Considering the number of companies listed in the DAX 40, investors pay close attention to the earnings and the quarterly reports.
Currency fluctuations
It is interesting to know that trade plays an important role in Germany. We are talking about a country that is the world’s third-largest exporter and third-largest importer at the same time, so the price of the Euro has a significant impact on the DAX 40. When the price of the Euro rises, the exporters consider it bad news, and when the price of the Euro decreases, life will be more difficult for importers.
The bottom line
The DAX 40 is one of the most important indices in all of Europe, belongs to Germany, and represents the power of the 40 major companies in Germany. So whenever analysts start the market of Europe, they will find themselves searching about the DAX 40 as it is the most influential index in the continent.
You will find major names and worldwide-known companies in this index that are all listed based on their market capitalization. As a trader in Forex, you should be able to understand different indexes, including the DAX 40, S&P 500, NASDAQ, and others, to make informed decisions. Remember that it is wise to use a demo account before making real trades if you’re not acquainted with the market and if you are a beginner.