Correlation Between Xtrackers California and Main International

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Can any of the company-specific risk be diversified away by investing in both Xtrackers California and Main 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 Xtrackers California and Main International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Xtrackers California Municipal and Main International ETF, you can compare the effects of market volatilities on Xtrackers California and Main 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 Xtrackers California with a short position of Main International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers California and Main International.

Diversification Opportunities for Xtrackers California and Main International

XtrackersMainDiversified AwayXtrackersMainDiversified Away100%
0.25
  Correlation Coefficient

Modest diversification

The 3 months correlation between Xtrackers and Main is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers California Municipal and Main International ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Main International ETF and Xtrackers California 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 California Municipal are associated (or correlated) with Main International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Main International ETF has no effect on the direction of Xtrackers California i.e., Xtrackers California and Main International go up and down completely randomly.

Pair Corralation between Xtrackers California and Main International

Allowing for the 90-day total investment horizon Xtrackers California Municipal is expected to generate 0.41 times more return on investment than Main International. However, Xtrackers California Municipal is 2.46 times less risky than Main International. It trades about -0.04 of its potential returns per unit of risk. Main International ETF is currently generating about -0.09 per unit of risk. If you would invest  2,514  in Xtrackers California Municipal on September 27, 2024 and sell it today you would lose (18.00) from holding Xtrackers California Municipal or give up 0.72% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Xtrackers California Municipal  vs.  Main International ETF

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -3-2-10123
JavaScript chart by amCharts 3.21.15CA INTL
       Timeline  
Xtrackers California 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Xtrackers California Municipal has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Xtrackers California is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15NovDecDec2525.52626.5
Main International ETF 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Main International ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Main International is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.
JavaScript chart by amCharts 3.21.15NovDecDec2222.52323.5

Xtrackers California and Main International Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-0.41-0.21-0.0817-0.0408-0.0040850.03160.07110.150.350.55 1234
JavaScript chart by amCharts 3.21.15CA INTL
       Returns  

Pair Trading with Xtrackers California and Main International

The main advantage of trading using opposite Xtrackers California and Main International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers California position performs unexpectedly, Main 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 Main International will offset losses from the drop in Main International's long position.
The idea behind Xtrackers California Municipal and Main International 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.
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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.

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