Correlation Between Xtrackers ShortDAX and BUNZL PLC

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

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

Diversification Opportunities for Xtrackers ShortDAX and BUNZL PLC

-0.5

Correlation Coefficient

Xtrackers ShortDAX  BUNZL PLC

Very good diversification

The 3 months correlation between Xtrackers and BUNZL is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers ShortDAX and BUNZL PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BUNZL PLC 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 BUNZL PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BUNZL PLC ADR has no effect on the direction of Xtrackers ShortDAX i.e., Xtrackers ShortDAX and BUNZL PLC go up and down completely randomly.

Pair Corralation between Xtrackers ShortDAX and BUNZL PLC

Assuming the 90 days trading horizon Xtrackers ShortDAX is expected to under-perform the BUNZL PLC. But the etf apears to be less risky and, when comparing its historical volatility, Xtrackers ShortDAX is 1.45 times less risky than BUNZL PLC. The etf trades about -0.49 of its potential returns per unit of risk. The BUNZL PLC ADR is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  2,050  in BUNZL PLC ADR on September 21, 2024 and sell it today you would lose (50.00) from holding BUNZL PLC ADR or give up 2.44% of portfolio value over 90 days.

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

Xtrackers ShortDAX  vs.  BUNZL PLC ADR

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 fragile 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.

BUNZL PLC ADR

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Xtrackers ShortDAX and BUNZL PLC

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

The idea behind Xtrackers ShortDAX and BUNZL PLC 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.