Correlation Between Xtrackers ShortDAX and HSBC Asia

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

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

Diversification Opportunities for Xtrackers ShortDAX and HSBC Asia

-0.59

Correlation Coefficient

Xtrackers ShortDAX  HSBC Asia

Excellent diversification

The 3 months correlation between Xtrackers and HSBC is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers ShortDAX and HSBC Asia Pacific in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HSBC Asia Pacific 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 HSBC Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HSBC Asia Pacific has no effect on the direction of Xtrackers ShortDAX i.e., Xtrackers ShortDAX and HSBC Asia go up and down completely randomly.

Pair Corralation between Xtrackers ShortDAX and HSBC Asia

Assuming the 90 days trading horizon Xtrackers ShortDAX is expected to under-perform the HSBC Asia. In addition to that, Xtrackers ShortDAX is 1.43 times more volatile than HSBC Asia Pacific. It trades about -0.11 of its total potential returns per unit of risk. HSBC Asia Pacific is currently generating about 0.0 per unit of volatility. If you would invest  1,678  in HSBC Asia Pacific on October 10, 2024 and sell it today you would lose (4.00) from holding HSBC Asia Pacific or give up 0.24% 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.  HSBC Asia Pacific

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.

HSBC Asia Pacific

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HSBC Asia Pacific has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, HSBC Asia 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 HSBC Asia

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

The idea behind Xtrackers ShortDAX and HSBC Asia Pacific 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.