Correlation Between Xtrackers MSCI and Xtrackers MSCI

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

By analyzing existing cross correlation between Xtrackers MSCI Europe and Xtrackers MSCI Japan, you can compare the effects of market volatilities on Xtrackers MSCI and Xtrackers MSCI 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 MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers MSCI and Xtrackers MSCI.

Diversification Opportunities for Xtrackers MSCI and Xtrackers MSCI

-0.06

Correlation Coefficient

Xtrackers MSCI  Xtrackers MSCI

Good diversification

The 3 months correlation between Xtrackers and Xtrackers is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers MSCI Europe and Xtrackers MSCI Japan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers MSCI Japan 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 Europe are associated (or correlated) with Xtrackers MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers MSCI Japan has no effect on the direction of Xtrackers MSCI i.e., Xtrackers MSCI and Xtrackers MSCI go up and down completely randomly.

Pair Corralation between Xtrackers MSCI and Xtrackers MSCI

Given the investment horizon of 90 days Xtrackers MSCI is expected to generate 6.53 times less return on investment than Xtrackers MSCI. But when comparing it to its historical volatility, Xtrackers MSCI Europe is 1.78 times less risky than Xtrackers MSCI. It trades about 0.04 of its potential returns per unit of risk. Xtrackers MSCI Japan is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  6,912  in Xtrackers MSCI Japan on September 12, 2024 and sell it today you would earn a total of  705.00  from holding Xtrackers MSCI Japan or generate 10.2% return on investment over 90 days.

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

Xtrackers MSCI Europe  vs.  Xtrackers MSCI Japan

Xtrackers MSCI Europe

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers MSCI Europe are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Xtrackers MSCI is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Xtrackers MSCI Japan

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers MSCI Japan are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively sluggish forward-looking indicators, Xtrackers MSCI may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Xtrackers MSCI and Xtrackers MSCI

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

The idea behind Xtrackers MSCI Europe and Xtrackers MSCI Japan 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.