Correlation Between DBX ETF and SPDR SP

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Can any of the company-specific risk be diversified away by investing in both DBX ETF and SPDR SP 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 DBX ETF and SPDR SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DBX ETF Trust and SPDR SP 400, you can compare the effects of market volatilities on DBX ETF and SPDR SP 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 DBX ETF with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of DBX ETF and SPDR SP.

Diversification Opportunities for DBX ETF and SPDR SP

0.97
  Correlation Coefficient

Almost no diversification

The 3 months correlation between DBX and SPDR is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding DBX ETF Trust and SPDR SP 400 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP 400 and DBX ETF 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 DBX ETF Trust are associated (or correlated) with SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP 400 has no effect on the direction of DBX ETF i.e., DBX ETF and SPDR SP go up and down completely randomly.

Pair Corralation between DBX ETF and SPDR SP

Given the investment horizon of 90 days DBX ETF Trust is expected to under-perform the SPDR SP. In addition to that, DBX ETF is 1.09 times more volatile than SPDR SP 400. It trades about -0.27 of its total potential returns per unit of risk. SPDR SP 400 is currently generating about -0.28 per unit of volatility. If you would invest  8,555  in SPDR SP 400 on January 20, 2024 and sell it today you would lose (432.00) from holding SPDR SP 400 or give up 5.05% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

DBX ETF Trust  vs.  SPDR SP 400

 Performance 
       Timeline  
DBX ETF Trust 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days DBX ETF Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, DBX ETF is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.
SPDR SP 400 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP 400 are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, SPDR SP may actually be approaching a critical reversion point that can send shares even higher in May 2024.

DBX ETF and SPDR SP Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with DBX ETF and SPDR SP

The main advantage of trading using opposite DBX ETF and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DBX ETF position performs unexpectedly, SPDR SP 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 SPDR SP will offset losses from the drop in SPDR SP's long position.
The idea behind DBX ETF Trust and SPDR SP 400 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.

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