Correlation Between Xtrackers MSCI and SPDR EURO

Can any of the company-specific risk be diversified away by investing in both Xtrackers MSCI and SPDR EURO 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 SPDR EURO 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 SPDR EURO STOXX, you can compare the effects of market volatilities on Xtrackers MSCI and SPDR EURO 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 SPDR EURO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers MSCI and SPDR EURO.

Diversification Opportunities for Xtrackers MSCI and SPDR EURO

0.95

Correlation Coefficient

Xtrackers MSCI  SPDR EURO

Almost no diversification

The 3 months correlation between Xtrackers and SPDR is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers MSCI Europe and SPDR EURO STOXX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR EURO STOXX 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 SPDR EURO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR EURO STOXX has no effect on the direction of Xtrackers MSCI i.e., Xtrackers MSCI and SPDR EURO go up and down completely randomly.

Pair Corralation between Xtrackers MSCI and SPDR EURO

Given the investment horizon of 90 days Xtrackers MSCI is expected to generate 1.68 times less return on investment than SPDR EURO. But when comparing it to its historical volatility, Xtrackers MSCI Europe is 1.64 times less risky than SPDR EURO. It trades about 0.19 of its potential returns per unit of risk. SPDR EURO STOXX is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  4,805  in SPDR EURO STOXX on December 29, 2024 and sell it today you would earn a total of  696.00  from holding SPDR EURO STOXX or generate 14.48% return on investment over 90 days.

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

Xtrackers MSCI Europe  vs.  SPDR EURO STOXX

Xtrackers MSCI Europe

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers MSCI Europe are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Xtrackers MSCI may actually be approaching a critical reversion point that can send shares even higher in April 2025.

SPDR EURO STOXX

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR EURO STOXX are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain technical and fundamental indicators, SPDR EURO showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xtrackers MSCI and SPDR EURO

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

The idea behind Xtrackers MSCI Europe and SPDR EURO STOXX 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.