Correlation Between BBVA Telecomunicacion and Xtrackers ShortDAX

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

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

Diversification Opportunities for BBVA Telecomunicacion and Xtrackers ShortDAX

0.59

Correlation Coefficient

BBVA Telecomunicacion  Xtrackers ShortDAX

Very weak diversification

The 3 months correlation between BBVA and Xtrackers is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding BBVA Telecomunicaciones PP and Xtrackers ShortDAX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers ShortDAX and BBVA Telecomunicacion 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 BBVA Telecomunicaciones PP 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 BBVA Telecomunicacion i.e., BBVA Telecomunicacion and Xtrackers ShortDAX go up and down completely randomly.

Pair Corralation between BBVA Telecomunicacion and Xtrackers ShortDAX

Assuming the 90 days trading horizon BBVA Telecomunicaciones PP is expected to generate 0.59 times more return on investment than Xtrackers ShortDAX. However, BBVA Telecomunicaciones PP is 1.71 times less risky than Xtrackers ShortDAX. It trades about -0.13 of its potential returns per unit of risk. Xtrackers ShortDAX is currently generating about -0.17 per unit of risk. If you would invest  3,023  in BBVA Telecomunicaciones PP on December 30, 2024 and sell it today you would lose (296.00) from holding BBVA Telecomunicaciones PP or give up 9.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

BBVA Telecomunicaciones PP  vs.  Xtrackers ShortDAX

BBVA Telecomunicaciones

Risk-Adjusted Performance

Very Weak

Over the last 90 days BBVA Telecomunicaciones PP has generated negative risk-adjusted returns adding no value to fund investors. Despite latest unsteady performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Xtrackers ShortDAX

Risk-Adjusted Performance

Very Weak

Over the last 90 days Xtrackers ShortDAX has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Etf's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the Exchange Traded Fund stockholders.

Pair Trading with BBVA Telecomunicacion and Xtrackers ShortDAX

The main advantage of trading using opposite BBVA Telecomunicacion and Xtrackers ShortDAX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BBVA Telecomunicacion 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 BBVA Telecomunicaciones PP 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.