Correlation Between Xtrackers ShortDAX and Far East

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

Diversification Opportunities for Xtrackers ShortDAX and Far East

-0.58
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Xtrackers and Far is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers ShortDAX and Far East Horizon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Far East Horizon 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 Far East. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Far East Horizon has no effect on the direction of Xtrackers ShortDAX i.e., Xtrackers ShortDAX and Far East go up and down completely randomly.

Pair Corralation between Xtrackers ShortDAX and Far East

Assuming the 90 days trading horizon Xtrackers ShortDAX is expected to under-perform the Far East. But the etf apears to be less risky and, when comparing its historical volatility, Xtrackers ShortDAX is 2.28 times less risky than Far East. The etf trades about -0.46 of its potential returns per unit of risk. The Far East Horizon is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  56.00  in Far East Horizon on September 22, 2024 and sell it today you would earn a total of  6.00  from holding Far East Horizon or generate 10.71% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy91.3%
ValuesDaily Returns

Xtrackers ShortDAX  vs.  Far East Horizon

 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 latest unsteady 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.
Far East Horizon 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Far East Horizon are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Far East reported solid returns over the last few months and may actually be approaching a breakup point.

Xtrackers ShortDAX and Far East Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Xtrackers ShortDAX and Far East

The main advantage of trading using opposite Xtrackers ShortDAX and Far East positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers ShortDAX position performs unexpectedly, Far East 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 Far East will offset losses from the drop in Far East's long position.
The idea behind Xtrackers ShortDAX and Far East Horizon 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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