Correlation Between VMware and Xtrackers
Can any of the company-specific risk be diversified away by investing in both VMware and Xtrackers 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 VMware and Xtrackers into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between VMware Inc and Xtrackers II , you can compare the effects of market volatilities on VMware and Xtrackers 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 VMware with a short position of Xtrackers. Check out your portfolio center. Please also check ongoing floating volatility patterns of VMware and Xtrackers.
Diversification Opportunities for VMware and Xtrackers
Very weak diversification
The 3 months correlation between VMware and Xtrackers is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding VMware Inc and Xtrackers II in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers II and VMware 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 VMware Inc are associated (or correlated) with Xtrackers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers II has no effect on the direction of VMware i.e., VMware and Xtrackers go up and down completely randomly.
Pair Corralation between VMware and Xtrackers
Considering the 90-day investment horizon VMware Inc is expected to generate 4.84 times more return on investment than Xtrackers. However, VMware is 4.84 times more volatile than Xtrackers II . It trades about 0.09 of its potential returns per unit of risk. Xtrackers II is currently generating about 0.04 per unit of risk. If you would invest 11,009 in VMware Inc on January 25, 2024 and sell it today you would earn a total of 3,239 from holding VMware Inc or generate 29.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 63.7% |
| Values | Daily Returns |
VMware Inc vs. Xtrackers II
Performance |
| Timeline |
| VMware Inc |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Xtrackers II |
VMware and Xtrackers Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with VMware and Xtrackers
The main advantage of trading using opposite VMware and Xtrackers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VMware position performs unexpectedly, Xtrackers 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 Xtrackers will offset losses from the drop in Xtrackers' long position.The idea behind VMware Inc and Xtrackers II 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.| Xtrackers vs. Xtrackers FTSE | Xtrackers vs. Xtrackers SP 500 | Xtrackers vs. Xtrackers MSCI | Xtrackers vs. Xtrackers Stoxx |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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