Correlation Between Xtrackers ShortDAX and ICICI Bank

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

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

Diversification Opportunities for Xtrackers ShortDAX and ICICI Bank

-0.16

Correlation Coefficient

Xtrackers ShortDAX  ICICI Bank

Good diversification

The 3 months correlation between Xtrackers and ICICI is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers ShortDAX and ICICI Bank Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ICICI Bank Limited 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 ICICI Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ICICI Bank Limited has no effect on the direction of Xtrackers ShortDAX i.e., Xtrackers ShortDAX and ICICI Bank go up and down completely randomly.

Pair Corralation between Xtrackers ShortDAX and ICICI Bank

Assuming the 90 days trading horizon Xtrackers ShortDAX is expected to under-perform the ICICI Bank. But the etf apears to be less risky and, when comparing its historical volatility, Xtrackers ShortDAX is 1.25 times less risky than ICICI Bank. The etf trades about -0.51 of its potential returns per unit of risk. The ICICI Bank Limited is currently generating about -0.37 of returns per unit of risk over similar time horizon. If you would invest  2,940  in ICICI Bank Limited on October 26, 2024 and sell it today you would lose (300.00) from holding ICICI Bank Limited or give up 10.2% of portfolio value over 90 days.

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

Xtrackers ShortDAX  vs.  ICICI Bank Limited

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.

ICICI Bank Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ICICI Bank Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's fundamental drivers remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Xtrackers ShortDAX and ICICI Bank

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

The idea behind Xtrackers ShortDAX and ICICI Bank Limited 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.