Correlation Between Xtrackers MSCI and Xtrackers Russell

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

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

Diversification Opportunities for Xtrackers MSCI and Xtrackers Russell

0.18

Correlation Coefficient

Xtrackers MSCI  Xtrackers Russell

Average diversification

The 3 months correlation between Xtrackers and Xtrackers is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers MSCI All and Xtrackers Russell Multifactor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers Russell and Xtrackers MSCI 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 MSCI All are associated (or correlated) with Xtrackers Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers Russell has no effect on the direction of Xtrackers MSCI i.e., Xtrackers MSCI and Xtrackers Russell go up and down completely randomly.

Pair Corralation between Xtrackers MSCI and Xtrackers Russell

Given the investment horizon of 90 days Xtrackers MSCI is expected to generate 1.27 times less return on investment than Xtrackers Russell. But when comparing it to its historical volatility, Xtrackers MSCI All is 1.3 times less risky than Xtrackers Russell. It trades about 0.28 of its potential returns per unit of risk. Xtrackers Russell Multifactor is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  5,413  in Xtrackers Russell Multifactor on October 24, 2024 and sell it today you would earn a total of  191.00  from holding Xtrackers Russell Multifactor or generate 3.53% return on investment over 90 days.

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

Xtrackers MSCI All  vs.  Xtrackers Russell Multifactor

Xtrackers MSCI All

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers MSCI All are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Xtrackers MSCI is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Xtrackers Russell

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers Russell Multifactor are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Xtrackers Russell is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Xtrackers MSCI and Xtrackers Russell

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

The idea behind Xtrackers MSCI All and Xtrackers Russell Multifactor 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.