Correlation Between Xtrackers and Xtrackers ShortDAX

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

Diversification Opportunities for Xtrackers and Xtrackers ShortDAX

-0.69
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Xtrackers and Xtrackers is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers II - and Xtrackers - ShortDAX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers - ShortDAX and Xtrackers 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 II are associated (or correlated) with Xtrackers ShortDAX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers - ShortDAX has no effect on the direction of Xtrackers i.e., Xtrackers and Xtrackers ShortDAX go up and down completely randomly.

Pair Corralation between Xtrackers and Xtrackers ShortDAX

Assuming the 90 days trading horizon Xtrackers II is expected to generate 0.23 times more return on investment than Xtrackers ShortDAX. However, Xtrackers II is 4.33 times less risky than Xtrackers ShortDAX. It trades about -0.01 of its potential returns per unit of risk. Xtrackers ShortDAX is currently generating about -0.04 per unit of risk. If you would invest  1,604  in Xtrackers II on November 24, 2023 and sell it today you would lose (36.00) from holding Xtrackers II or give up 2.24% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy99.8%
ValuesDaily Returns

Xtrackers II -  vs.  Xtrackers - ShortDAX

 Performance 
       Timeline  
Xtrackers II - 

Risk-Adjusted Performance

5 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers II are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Xtrackers is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
Xtrackers - ShortDAX 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Xtrackers ShortDAX has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Etf's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the Exchange Traded Fund stockholders.

Xtrackers and Xtrackers ShortDAX Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Xtrackers and Xtrackers ShortDAX

The main advantage of trading using opposite Xtrackers and Xtrackers ShortDAX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers position performs unexpectedly, Xtrackers ShortDAX 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 ShortDAX will offset losses from the drop in Xtrackers ShortDAX's long position.
The idea behind Xtrackers II and Xtrackers ShortDAX 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.

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