Correlation Between Xtrackers ShortDAX and FF European

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

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

Diversification Opportunities for Xtrackers ShortDAX and FF European

-0.75

Correlation Coefficient

Xtrackers ShortDAX  FF European

Pay attention - limited upside

The 3 months correlation between Xtrackers and FJ2B is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers ShortDAX and FF European in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FF European 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 FF European. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FF European has no effect on the direction of Xtrackers ShortDAX i.e., Xtrackers ShortDAX and FF European go up and down completely randomly.

Pair Corralation between Xtrackers ShortDAX and FF European

Assuming the 90 days trading horizon Xtrackers ShortDAX is expected to under-perform the FF European. In addition to that, Xtrackers ShortDAX is 1.85 times more volatile than FF European. It trades about -0.17 of its total potential returns per unit of risk. FF European is currently generating about -0.09 per unit of volatility. If you would invest  1,991  in FF European on September 23, 2024 and sell it today you would lose (28.00) from holding FF European or give up 1.41% of portfolio value over 90 days.

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

Xtrackers ShortDAX  vs.  FF European

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 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.

FF European

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FF European has generated negative risk-adjusted returns adding no value to fund investors. In spite of rather sound technical and fundamental indicators, FF European is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Xtrackers ShortDAX and FF European

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

The idea behind Xtrackers ShortDAX and FF European 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.