Correlation Between Xtrackers ShortDAX and Five Below

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

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

Diversification Opportunities for Xtrackers ShortDAX and Five Below

-0.89

Correlation Coefficient

Xtrackers ShortDAX  Five Below

Pay attention - limited upside

The 3 months correlation between Xtrackers and Five is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers ShortDAX and Five Below in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Five Below 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 Five Below. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Five Below has no effect on the direction of Xtrackers ShortDAX i.e., Xtrackers ShortDAX and Five Below go up and down completely randomly.

Pair Corralation between Xtrackers ShortDAX and Five Below

Assuming the 90 days trading horizon Xtrackers ShortDAX is expected to generate 0.6 times more return on investment than Five Below. However, Xtrackers ShortDAX is 1.66 times less risky than Five Below. It trades about -0.05 of its potential returns per unit of risk. Five Below is currently generating about -0.03 per unit of risk. If you would invest  123.00  in Xtrackers ShortDAX on October 5, 2024 and sell it today you would lose (43.00) from holding Xtrackers ShortDAX or give up 34.96% of portfolio value over 90 days.

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

Xtrackers ShortDAX  vs.  Five Below

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.

Five Below

Risk-Adjusted Performance

0 of 100

Modest

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

Pair Trading with Xtrackers ShortDAX and Five Below

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

The idea behind Xtrackers ShortDAX and Five Below 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.