Correlation Between Xtrackers ShortDAX and Autohome ADR

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Can any of the company-specific risk be diversified away by investing in both Xtrackers ShortDAX and Autohome ADR 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 Autohome ADR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Xtrackers ShortDAX and Autohome ADR, you can compare the effects of market volatilities on Xtrackers ShortDAX and Autohome ADR 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 Autohome ADR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers ShortDAX and Autohome ADR.

Diversification Opportunities for Xtrackers ShortDAX and Autohome ADR

-0.61
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Xtrackers and Autohome is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers ShortDAX and Autohome ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Autohome ADR 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 Autohome ADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Autohome ADR has no effect on the direction of Xtrackers ShortDAX i.e., Xtrackers ShortDAX and Autohome ADR go up and down completely randomly.

Pair Corralation between Xtrackers ShortDAX and Autohome ADR

Assuming the 90 days trading horizon Xtrackers ShortDAX is expected to generate 0.76 times more return on investment than Autohome ADR. However, Xtrackers ShortDAX is 1.32 times less risky than Autohome ADR. It trades about 0.04 of its potential returns per unit of risk. Autohome ADR is currently generating about -0.09 per unit of risk. If you would invest  83.00  in Xtrackers ShortDAX on August 30, 2024 and sell it today you would earn a total of  1.00  from holding Xtrackers ShortDAX or generate 1.2% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy91.3%
ValuesDaily Returns

Xtrackers ShortDAX  vs.  Autohome ADR

 Performance 
       Timeline  
Xtrackers ShortDAX 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Xtrackers ShortDAX has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Xtrackers ShortDAX is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.
Autohome ADR 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Autohome ADR are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical indicators, Autohome ADR reported solid returns over the last few months and may actually be approaching a breakup point.

Xtrackers ShortDAX and Autohome ADR Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Xtrackers ShortDAX and Autohome ADR

The main advantage of trading using opposite Xtrackers ShortDAX and Autohome ADR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers ShortDAX position performs unexpectedly, Autohome ADR 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 Autohome ADR will offset losses from the drop in Autohome ADR's long position.
The idea behind Xtrackers ShortDAX and Autohome ADR 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.

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