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 Eurozone 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

-0.02

Correlation Coefficient

Xtrackers MSCI  Xtrackers Russell

Good diversification

The 3 months correlation between Xtrackers and Xtrackers is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers MSCI Eurozone 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 Eurozone 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 Eurozone is expected to generate 1.04 times more return on investment than Xtrackers Russell. However, Xtrackers MSCI is 1.04 times more volatile than Xtrackers Russell Multifactor. It trades about 0.25 of its potential returns per unit of risk. Xtrackers Russell Multifactor is currently generating about -0.03 per unit of risk. If you would invest  4,559  in Xtrackers MSCI Eurozone on December 23, 2024 and sell it today you would earn a total of  569.00  from holding Xtrackers MSCI Eurozone or generate 12.48% return on investment over 90 days.

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

Xtrackers MSCI Eurozone  vs.  Xtrackers Russell Multifactor

Xtrackers MSCI Eurozone

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers MSCI Eurozone are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain technical and fundamental indicators, Xtrackers MSCI may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Xtrackers Russell

Risk-Adjusted Performance

Very Weak

Over the last 90 days Xtrackers Russell Multifactor has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Eurozone 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.

Check out your portfolio center.

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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.