Correlation Between Xtrackers ShortDAX and Patterson Companies

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

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

Diversification Opportunities for Xtrackers ShortDAX and Patterson Companies

-0.65

Correlation Coefficient

Xtrackers ShortDAX  Patterson Companies

Excellent diversification

The 3 months correlation between Xtrackers and Patterson is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers ShortDAX and Patterson Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Patterson Companies 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 Patterson Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Patterson Companies has no effect on the direction of Xtrackers ShortDAX i.e., Xtrackers ShortDAX and Patterson Companies go up and down completely randomly.

Pair Corralation between Xtrackers ShortDAX and Patterson Companies

Assuming the 90 days trading horizon Xtrackers ShortDAX is expected to generate 7.35 times less return on investment than Patterson Companies. But when comparing it to its historical volatility, Xtrackers ShortDAX is 11.92 times less risky than Patterson Companies. It trades about 0.43 of its potential returns per unit of risk. Patterson Companies is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  2,160  in Patterson Companies on October 8, 2024 and sell it today you would earn a total of  840.00  from holding Patterson Companies or generate 38.89% 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.  Patterson Companies

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.

Patterson Companies

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Patterson Companies are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Patterson Companies unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xtrackers ShortDAX and Patterson Companies

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

The idea behind Xtrackers ShortDAX and Patterson Companies 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.