Correlation Between HR GmbH and Xtrackers LevDAX

Can any of the company-specific risk be diversified away by investing in both HR GmbH and Xtrackers LevDAX 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 HR GmbH and Xtrackers LevDAX into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between HR GmbH Co and Xtrackers LevDAX, you can compare the effects of market volatilities on HR GmbH and Xtrackers LevDAX 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 HR GmbH with a short position of Xtrackers LevDAX. Check out your portfolio center. Please also check ongoing floating volatility patterns of HR GmbH and Xtrackers LevDAX.

Diversification Opportunities for HR GmbH and Xtrackers LevDAX

-0.08

Correlation Coefficient

HR GmbH  Xtrackers LevDAX

Good diversification

The 3 months correlation between 2HRA and Xtrackers is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding HR GmbH Co and Xtrackers LevDAX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers LevDAX and HR GmbH 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 HR GmbH Co are associated (or correlated) with Xtrackers LevDAX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers LevDAX has no effect on the direction of HR GmbH i.e., HR GmbH and Xtrackers LevDAX go up and down completely randomly.

Pair Corralation between HR GmbH and Xtrackers LevDAX

Assuming the 90 days trading horizon HR GmbH Co is expected to under-perform the Xtrackers LevDAX. But the stock apears to be less risky and, when comparing its historical volatility, HR GmbH Co is 1.12 times less risky than Xtrackers LevDAX. The stock trades about -0.29 of its potential returns per unit of risk. The Xtrackers LevDAX is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  17,928  in Xtrackers LevDAX on January 26, 2024 and sell it today you would lose (664.00) from holding Xtrackers LevDAX or give up 3.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

HR GmbH Co  vs.  Xtrackers LevDAX

HR GmbH

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HR GmbH Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, HR GmbH is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Xtrackers LevDAX

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers LevDAX are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Xtrackers LevDAX may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with HR GmbH and Xtrackers LevDAX

The main advantage of trading using opposite HR GmbH and Xtrackers LevDAX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HR GmbH position performs unexpectedly, Xtrackers LevDAX 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 LevDAX will offset losses from the drop in Xtrackers LevDAX's long position.

The idea behind HR GmbH Co and Xtrackers LevDAX 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.

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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.