Correlation Between Cardano and Xtrackers

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

By analyzing existing cross correlation between Cardano and Xtrackers SP 500, you can compare the effects of market volatilities on Cardano and Xtrackers 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 Cardano with a short position of Xtrackers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cardano and Xtrackers.

Diversification Opportunities for Cardano and Xtrackers

0.77

Correlation Coefficient

Cardano  Xtrackers

Poor diversification

The 3 months correlation between Cardano and Xtrackers is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Cardano and Xtrackers SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers SP 500 and Cardano 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 Cardano are associated (or correlated) with Xtrackers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers SP 500 has no effect on the direction of Cardano i.e., Cardano and Xtrackers go up and down completely randomly.

Pair Corralation between Cardano and Xtrackers

Assuming the 90 days trading horizon Cardano is expected to generate 10.57 times more return on investment than Xtrackers. However, Cardano is 10.57 times more volatile than Xtrackers SP 500. It trades about 0.27 of its potential returns per unit of risk. Xtrackers SP 500 is currently generating about -0.04 per unit of risk. If you would invest  50.00  in Cardano on October 9, 2024 and sell it today you would earn a total of  59.00  from holding Cardano or generate 118.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Cardano  vs.  Xtrackers SP 500

Cardano

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cardano are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Cardano exhibited solid returns over the last few months and may actually be approaching a breakup point.

Xtrackers SP 500

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers SP 500 are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Xtrackers is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Cardano and Xtrackers

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

The idea behind Cardano and Xtrackers SP 500 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.