Correlation Between Xtrackers ShortDAX and Cofina SGPS

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

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

Diversification Opportunities for Xtrackers ShortDAX and Cofina SGPS

-0.27

Correlation Coefficient

Xtrackers ShortDAX  Cofina SGPS

Very good diversification

The 3 months correlation between Xtrackers and Cofina is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers ShortDAX and Cofina SGPS SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cofina SGPS SA 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 Cofina SGPS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cofina SGPS SA has no effect on the direction of Xtrackers ShortDAX i.e., Xtrackers ShortDAX and Cofina SGPS go up and down completely randomly.

Pair Corralation between Xtrackers ShortDAX and Cofina SGPS

Assuming the 90 days trading horizon Xtrackers ShortDAX is expected to generate 4.36 times less return on investment than Cofina SGPS. But when comparing it to its historical volatility, Xtrackers ShortDAX is 27.05 times less risky than Cofina SGPS. It trades about 0.28 of its potential returns per unit of risk. Cofina SGPS SA is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  3,400  in Cofina SGPS SA on October 5, 2024 and sell it today you would lose (720.00) from holding Cofina SGPS SA or give up 21.18% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.44%
Values	Daily Returns

Xtrackers ShortDAX  vs.  Cofina SGPS SA

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.

Cofina SGPS SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cofina SGPS SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Xtrackers ShortDAX and Cofina SGPS

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

The idea behind Xtrackers ShortDAX and Cofina SGPS SA 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.