Correlation Between Xtrackers Harvest and First Trust

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

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

Diversification Opportunities for Xtrackers Harvest and First Trust

0.94

Correlation Coefficient

Xtrackers Harvest  First Trust

Almost no diversification

The 3 months correlation between Xtrackers and First is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers Harvest CSI and First Trust China in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust China and Xtrackers Harvest 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 Harvest CSI are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust China has no effect on the direction of Xtrackers Harvest i.e., Xtrackers Harvest and First Trust go up and down completely randomly.

Pair Corralation between Xtrackers Harvest and First Trust

Given the investment horizon of 90 days Xtrackers Harvest CSI is expected to generate 1.08 times more return on investment than First Trust. However, Xtrackers Harvest is 1.08 times more volatile than First Trust China. It trades about 0.05 of its potential returns per unit of risk. First Trust China is currently generating about 0.02 per unit of risk. If you would invest  2,377  in Xtrackers Harvest CSI on September 19, 2024 and sell it today you would earn a total of  306.00  from holding Xtrackers Harvest CSI or generate 12.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Xtrackers Harvest CSI  vs.  First Trust China

Xtrackers Harvest CSI

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers Harvest CSI are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent technical indicators, Xtrackers Harvest reported solid returns over the last few months and may actually be approaching a breakup point.

First Trust China

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust China are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, First Trust sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xtrackers Harvest and First Trust

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

The idea behind Xtrackers Harvest CSI and First Trust China 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.