Correlation Between Xtrackers ShortDAX and IND+COMMBK CHINA

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

By analyzing existing cross correlation between Xtrackers ShortDAX and INDCOMMBK CHINA ADR20, you can compare the effects of market volatilities on Xtrackers ShortDAX and IND+COMMBK CHINA 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 IND+COMMBK CHINA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers ShortDAX and IND+COMMBK CHINA.

Diversification Opportunities for Xtrackers ShortDAX and IND+COMMBK CHINA

-0.76

Correlation Coefficient

Xtrackers ShortDAX  IND+COMMBK CHINA

Pay attention - limited upside

The 3 months correlation between Xtrackers and IND+COMMBK is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers ShortDAX and INDCOMMBK CHINA ADR20 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INDCOMMBK CHINA ADR20 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 IND+COMMBK CHINA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INDCOMMBK CHINA ADR20 has no effect on the direction of Xtrackers ShortDAX i.e., Xtrackers ShortDAX and IND+COMMBK CHINA go up and down completely randomly.

Pair Corralation between Xtrackers ShortDAX and IND+COMMBK CHINA

Assuming the 90 days trading horizon Xtrackers ShortDAX is expected to under-perform the IND+COMMBK CHINA. But the etf apears to be less risky and, when comparing its historical volatility, Xtrackers ShortDAX is 1.58 times less risky than IND+COMMBK CHINA. The etf trades about -0.01 of its potential returns per unit of risk. The INDCOMMBK CHINA ADR20 is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  980.00  in INDCOMMBK CHINA ADR20 on August 31, 2024 and sell it today you would earn a total of  100.00  from holding INDCOMMBK CHINA ADR20 or generate 10.2% return on investment over 90 days.

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

Xtrackers ShortDAX  vs.  INDCOMMBK CHINA ADR20

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 nearly stable basic indicators, Xtrackers ShortDAX is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

INDCOMMBK CHINA ADR20

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in INDCOMMBK CHINA ADR20 are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward-looking signals, IND+COMMBK CHINA may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Xtrackers ShortDAX and IND+COMMBK CHINA

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

The idea behind Xtrackers ShortDAX and INDCOMMBK CHINA ADR20 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.