Correlation Between Xtrackers LevDAX and KAP AG

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

By analyzing existing cross correlation between Xtrackers LevDAX and KAP AG, you can compare the effects of market volatilities on Xtrackers LevDAX and KAP AG 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 KAP AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers LevDAX and KAP AG.

Diversification Opportunities for Xtrackers LevDAX and KAP AG

-0.82

Correlation Coefficient

Xtrackers LevDAX  KAP AG

Pay attention - limited upside

The 3 months correlation between Xtrackers and KAP is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers LevDAX and KAP AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KAP AG 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 KAP AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KAP AG has no effect on the direction of Xtrackers LevDAX i.e., Xtrackers LevDAX and KAP AG go up and down completely randomly.

Pair Corralation between Xtrackers LevDAX and KAP AG

Assuming the 90 days trading horizon Xtrackers LevDAX is expected to under-perform the KAP AG. In addition to that, Xtrackers LevDAX is 2.62 times more volatile than KAP AG. It trades about -0.16 of its total potential returns per unit of risk. KAP AG is currently generating about -0.11 per unit of volatility. If you would invest  1,010  in KAP AG on February 3, 2024 and sell it today you would lose (15.00) from holding KAP AG or give up 1.49% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Xtrackers LevDAX  vs.  KAP AG

Xtrackers LevDAX

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers LevDAX are ranked lower than 10 (%) 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 June 2024.

KAP AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KAP AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Xtrackers LevDAX and KAP AG

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

The idea behind Xtrackers LevDAX and KAP AG 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.