Correlation Between Xtrackers ShortDAX and Citizens Financial

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

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

Diversification Opportunities for Xtrackers ShortDAX and Citizens Financial

-0.4

Correlation Coefficient

Xtrackers ShortDAX  Citizens Financial

Very good diversification

The 3 months correlation between Xtrackers and Citizens is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers ShortDAX and Citizens Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citizens Financial 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 Citizens Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citizens Financial has no effect on the direction of Xtrackers ShortDAX i.e., Xtrackers ShortDAX and Citizens Financial go up and down completely randomly.

Pair Corralation between Xtrackers ShortDAX and Citizens Financial

Assuming the 90 days trading horizon Xtrackers ShortDAX is expected to under-perform the Citizens Financial. But the etf apears to be less risky and, when comparing its historical volatility, Xtrackers ShortDAX is 1.05 times less risky than Citizens Financial. The etf trades about -0.49 of its potential returns per unit of risk. The Citizens Financial Group is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  4,384  in Citizens Financial Group on September 20, 2024 and sell it today you would lose (139.00) from holding Citizens Financial Group or give up 3.17% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

Xtrackers ShortDAX  vs.  Citizens Financial Group

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 unsteady performance in the last few months, the Etf's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the Exchange Traded Fund stockholders.

Citizens Financial

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citizens Financial Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Citizens Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xtrackers ShortDAX and Citizens Financial

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

The idea behind Xtrackers ShortDAX and Citizens Financial Group 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..