Correlation Between Xtrackers ShortDAX and IShares Core

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

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

Diversification Opportunities for Xtrackers ShortDAX and IShares Core

-0.99

Correlation Coefficient

Xtrackers ShortDAX  IShares Core

Pay attention - limited upside

The 3 months correlation between Xtrackers and IShares is -0.99. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers ShortDAX and iShares Core DAX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core DAX 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 IShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core DAX has no effect on the direction of Xtrackers ShortDAX i.e., Xtrackers ShortDAX and IShares Core go up and down completely randomly.

Pair Corralation between Xtrackers ShortDAX and IShares Core

Assuming the 90 days trading horizon Xtrackers ShortDAX is expected to under-perform the IShares Core. In addition to that, Xtrackers ShortDAX is 2.05 times more volatile than iShares Core DAX. It trades about -0.42 of its total potential returns per unit of risk. iShares Core DAX is currently generating about 0.48 per unit of volatility. If you would invest  16,542  in iShares Core DAX on October 22, 2024 and sell it today you would earn a total of  842.00  from holding iShares Core DAX or generate 5.09% return on investment over 90 days.

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

Xtrackers ShortDAX  vs.  iShares Core DAX

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 unsteady performance in the last few months, the Etf's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the Exchange Traded Fund stockholders.

iShares Core DAX

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core DAX are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, IShares Core may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Xtrackers ShortDAX and IShares Core

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

The idea behind Xtrackers ShortDAX and iShares Core DAX 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.