Correlation Between Xtrackers ShortDAX and Kunlun Energy

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

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

Diversification Opportunities for Xtrackers ShortDAX and Kunlun Energy

0.54

Correlation Coefficient

Xtrackers ShortDAX  Kunlun Energy

Very weak diversification

The 3 months correlation between Xtrackers and Kunlun is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers ShortDAX and Kunlun Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kunlun Energy 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 Kunlun Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kunlun Energy has no effect on the direction of Xtrackers ShortDAX i.e., Xtrackers ShortDAX and Kunlun Energy go up and down completely randomly.

Pair Corralation between Xtrackers ShortDAX and Kunlun Energy

Assuming the 90 days trading horizon Xtrackers ShortDAX is expected to under-perform the Kunlun Energy. In addition to that, Xtrackers ShortDAX is 1.52 times more volatile than Kunlun Energy. It trades about -0.22 of its total potential returns per unit of risk. Kunlun Energy is currently generating about -0.06 per unit of volatility. If you would invest  100.00  in Kunlun Energy on December 25, 2024 and sell it today you would lose (5.00) from holding Kunlun Energy or give up 5.0% of portfolio value over 90 days.

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

Xtrackers ShortDAX  vs.  Kunlun Energy

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.

Kunlun Energy

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Xtrackers ShortDAX and Kunlun Energy

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

The idea behind Xtrackers ShortDAX and Kunlun Energy 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.