Correlation Between Xtrackers ShortDAX and Companhia

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

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

Diversification Opportunities for Xtrackers ShortDAX and Companhia

0.6

Correlation Coefficient

Xtrackers ShortDAX  Companhia

Poor diversification

The 3 months correlation between Xtrackers and Companhia is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers ShortDAX and Companhia de Saneamento in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia de Saneamento 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 Companhia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Companhia de Saneamento has no effect on the direction of Xtrackers ShortDAX i.e., Xtrackers ShortDAX and Companhia go up and down completely randomly.

Pair Corralation between Xtrackers ShortDAX and Companhia

Assuming the 90 days trading horizon Xtrackers ShortDAX is expected to under-perform the Companhia. But the etf apears to be less risky and, when comparing its historical volatility, Xtrackers ShortDAX is 1.26 times less risky than Companhia. The etf trades about -0.07 of its potential returns per unit of risk. The Companhia de Saneamento is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,324  in Companhia de Saneamento on September 30, 2024 and sell it today you would earn a total of  56.00  from holding Companhia de Saneamento or generate 4.23% return on investment over 90 days.

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

Xtrackers ShortDAX  vs.  Companhia de Saneamento

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.

Companhia de Saneamento

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Companhia de Saneamento has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward-looking indicators, Companhia is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Xtrackers ShortDAX and Companhia

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

The idea behind Xtrackers ShortDAX and Companhia de Saneamento 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.