Correlation Between Xtrackers ShortDAX and Chegg

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

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

Diversification Opportunities for Xtrackers ShortDAX and Chegg

-0.67

Correlation Coefficient

Xtrackers ShortDAX  Chegg

Excellent diversification

The 3 months correlation between Xtrackers and Chegg is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers ShortDAX and Chegg Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chegg Inc and Xtrackers ShortDAX 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 ShortDAX are associated (or correlated) with Chegg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chegg Inc has no effect on the direction of Xtrackers ShortDAX i.e., Xtrackers ShortDAX and Chegg go up and down completely randomly.

Pair Corralation between Xtrackers ShortDAX and Chegg

Assuming the 90 days trading horizon Xtrackers ShortDAX is expected to generate 0.3 times more return on investment than Chegg. However, Xtrackers ShortDAX is 3.35 times less risky than Chegg. It trades about -0.06 of its potential returns per unit of risk. Chegg Inc is currently generating about -0.07 per unit of risk. If you would invest  127.00  in Xtrackers ShortDAX on October 5, 2024 and sell it today you would lose (47.00) from holding Xtrackers ShortDAX or give up 37.01% of portfolio value over 90 days.

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

Xtrackers ShortDAX  vs.  Chegg Inc

Xtrackers ShortDAX

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xtrackers ShortDAX has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Etf's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the Exchange Traded Fund stockholders.

Chegg Inc

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Chegg Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly uncertain basic indicators, Chegg reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xtrackers ShortDAX and Chegg

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

The idea behind Xtrackers ShortDAX and Chegg Inc 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.