Correlation Between Xtrackers ShortDAX and Vanguard FTSE

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

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

Diversification Opportunities for Xtrackers ShortDAX and Vanguard FTSE

-0.63

Correlation Coefficient

Xtrackers ShortDAX  Vanguard FTSE

Excellent diversification

The 3 months correlation between Xtrackers and Vanguard is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers ShortDAX and Vanguard FTSE All World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard FTSE All 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 Vanguard FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard FTSE All has no effect on the direction of Xtrackers ShortDAX i.e., Xtrackers ShortDAX and Vanguard FTSE go up and down completely randomly.

Pair Corralation between Xtrackers ShortDAX and Vanguard FTSE

Assuming the 90 days trading horizon Xtrackers ShortDAX is expected to under-perform the Vanguard FTSE. In addition to that, Xtrackers ShortDAX is 2.27 times more volatile than Vanguard FTSE All World. It trades about -0.05 of its total potential returns per unit of risk. Vanguard FTSE All World is currently generating about 0.09 per unit of volatility. If you would invest  9,679  in Vanguard FTSE All World on October 4, 2024 and sell it today you would earn a total of  3,521  from holding Vanguard FTSE All World or generate 36.38% 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.  Vanguard FTSE All World

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.

Vanguard FTSE All

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard FTSE All World are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Vanguard FTSE is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Xtrackers ShortDAX and Vanguard FTSE

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

The idea behind Xtrackers ShortDAX and Vanguard FTSE All World 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.