Correlation Between Xtrackers ShortDAX and AlzChem Group

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

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

Diversification Opportunities for Xtrackers ShortDAX and AlzChem Group

-0.57

Correlation Coefficient

Xtrackers ShortDAX  AlzChem Group

Excellent diversification

The 3 months correlation between Xtrackers and AlzChem is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers ShortDAX and AlzChem Group AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AlzChem Group AG 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 AlzChem Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AlzChem Group AG has no effect on the direction of Xtrackers ShortDAX i.e., Xtrackers ShortDAX and AlzChem Group go up and down completely randomly.

Pair Corralation between Xtrackers ShortDAX and AlzChem Group

Assuming the 90 days trading horizon Xtrackers ShortDAX is expected to under-perform the AlzChem Group. But the etf apears to be less risky and, when comparing its historical volatility, Xtrackers ShortDAX is 2.38 times less risky than AlzChem Group. The etf trades about -0.15 of its potential returns per unit of risk. The AlzChem Group AG is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  4,170  in AlzChem Group AG on September 17, 2024 and sell it today you would earn a total of  1,570  from holding AlzChem Group AG or generate 37.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Xtrackers ShortDAX  vs.  AlzChem Group AG

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 fragile 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.

AlzChem Group AG

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AlzChem Group AG are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, AlzChem Group unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xtrackers ShortDAX and AlzChem Group

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

The idea behind Xtrackers ShortDAX and AlzChem Group AG 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.