Correlation Between Xtrackers ShortDAX and MSCI

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

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

Diversification Opportunities for Xtrackers ShortDAX and MSCI

0.76

Correlation Coefficient

Xtrackers ShortDAX  MSCI

Poor diversification

The 3 months correlation between Xtrackers and MSCI is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers ShortDAX and MSCI Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MSCI 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 MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MSCI Inc has no effect on the direction of Xtrackers ShortDAX i.e., Xtrackers ShortDAX and MSCI go up and down completely randomly.

Pair Corralation between Xtrackers ShortDAX and MSCI

Assuming the 90 days trading horizon Xtrackers ShortDAX is expected to under-perform the MSCI. In addition to that, Xtrackers ShortDAX is 1.27 times more volatile than MSCI Inc. It trades about -0.17 of its total potential returns per unit of risk. MSCI Inc is currently generating about -0.09 per unit of volatility. If you would invest  58,017  in MSCI Inc on December 30, 2024 and sell it today you would lose (5,437) from holding MSCI Inc or give up 9.37% of portfolio value over 90 days.

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

Xtrackers ShortDAX  vs.  MSCI Inc

Xtrackers ShortDAX

Risk-Adjusted Performance

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 April 2025. The current disturbance may also be a sign of long-run up-swing for the Exchange Traded Fund stockholders.

MSCI Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days MSCI Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Xtrackers ShortDAX and MSCI

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

The idea behind Xtrackers ShortDAX and MSCI 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.