Correlation Between Avantis Emerging and Xtrackers International

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

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

Diversification Opportunities for Avantis Emerging and Xtrackers International

0.59

Correlation Coefficient

Avantis Emerging  Xtrackers International

Very weak diversification

The 3 months correlation between Avantis and Xtrackers is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Avantis Emerging Markets and Xtrackers International Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers International and Avantis Emerging 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 Avantis Emerging Markets are associated (or correlated) with Xtrackers International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers International has no effect on the direction of Avantis Emerging i.e., Avantis Emerging and Xtrackers International go up and down completely randomly.

Pair Corralation between Avantis Emerging and Xtrackers International

Given the investment horizon of 90 days Avantis Emerging Markets is expected to generate 1.26 times more return on investment than Xtrackers International. However, Avantis Emerging is 1.26 times more volatile than Xtrackers International Real. It trades about 0.04 of its potential returns per unit of risk. Xtrackers International Real is currently generating about -0.15 per unit of risk. If you would invest  6,081  in Avantis Emerging Markets on September 13, 2024 and sell it today you would earn a total of  158.00  from holding Avantis Emerging Markets or generate 2.6% return on investment over 90 days.

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

Avantis Emerging Markets  vs.  Xtrackers International Real

Avantis Emerging Markets

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Avantis Emerging Markets are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Avantis Emerging is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Xtrackers International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xtrackers International Real has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Pair Trading with Avantis Emerging and Xtrackers International

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

The idea behind Avantis Emerging Markets and Xtrackers International Real 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 Global Correlations module to find global opportunities by holding instruments from different markets.