Correlation Between Xtrackers LevDAX and Ensign

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

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

Diversification Opportunities for Xtrackers LevDAX and Ensign

0.33

Correlation Coefficient

Xtrackers LevDAX Ensign

Weak diversification

The 3 months correlation between Xtrackers and Ensign is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers - LevDAX and The Ensign Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ensign Group and Xtrackers LevDAX 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 Xtrackers LevDAX are associated (or correlated) with Ensign. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ensign Group has no effect on the direction of Xtrackers LevDAX i.e., Xtrackers LevDAX and Ensign go up and down completely randomly.

Pair Corralation between Xtrackers LevDAX and Ensign

Assuming the 90 days trading horizon Xtrackers LevDAX is expected to generate 1.2 times more return on investment than Ensign. However, Xtrackers LevDAX is 1.2 times more volatile than The Ensign Group. It trades about 0.08 of its potential returns per unit of risk. The Ensign Group is currently generating about -0.03 per unit of risk. If you would invest  12,018  in Xtrackers LevDAX on March 3, 2023 and sell it today you would earn a total of  2,004  from holding Xtrackers LevDAX or generate 16.67% return on investment over 90 days.

Xtrackers - LevDAX  vs.  The Ensign Group

Xtrackers - LevDAX

Xtrackers Performance

2 of 100

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers LevDAX are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Xtrackers LevDAX is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Ensign Group

Ensign Performance

0 of 100

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

Pair Trading with Xtrackers LevDAX and Ensign

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

The idea behind Xtrackers LevDAX and The Ensign Group 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.

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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.