Correlation Between Xtrackers ShortDAX and IShares SLI

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

By analyzing existing cross correlation between Xtrackers ShortDAX Daily and iShares SLI ETF, you can compare the effects of market volatilities on Xtrackers ShortDAX and IShares SLI 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 ShortDAX with a short position of IShares SLI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers ShortDAX and IShares SLI.

Diversification Opportunities for Xtrackers ShortDAX and IShares SLI

-0.75

Correlation Coefficient

Xtrackers ShortDAX  IShares SLI

Pay attention - limited upside

The 3 months correlation between Xtrackers and IShares is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers ShortDAX Daily and iShares SLI ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SLI ETF and Xtrackers ShortDAX 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 ShortDAX Daily are associated (or correlated) with IShares SLI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares SLI ETF has no effect on the direction of Xtrackers ShortDAX i.e., Xtrackers ShortDAX and IShares SLI go up and down completely randomly.

Pair Corralation between Xtrackers ShortDAX and IShares SLI

Assuming the 90 days trading horizon Xtrackers ShortDAX is expected to generate 28.23 times less return on investment than IShares SLI. But when comparing it to its historical volatility, Xtrackers ShortDAX Daily is 1.06 times less risky than IShares SLI. It trades about 0.01 of its potential returns per unit of risk. iShares SLI ETF is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  19,358  in iShares SLI ETF on February 28, 2024 and sell it today you would earn a total of  1,582  from holding iShares SLI ETF or generate 8.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Xtrackers ShortDAX Daily  vs.  iShares SLI ETF

Xtrackers ShortDAX Daily

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xtrackers ShortDAX Daily has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Xtrackers ShortDAX is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

iShares SLI ETF

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SLI ETF are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal forward indicators, IShares SLI may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Xtrackers ShortDAX and IShares SLI

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

The idea behind Xtrackers ShortDAX Daily and iShares SLI ETF 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 the Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.