Correlation Between Xtrackers ShortDAX and Walmart

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

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

Diversification Opportunities for Xtrackers ShortDAX and Walmart

-0.4

Correlation Coefficient

Xtrackers ShortDAX  Walmart

Very good diversification

The 3 months correlation between Xtrackers and Walmart is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers ShortDAX and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart 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 Walmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walmart has no effect on the direction of Xtrackers ShortDAX i.e., Xtrackers ShortDAX and Walmart go up and down completely randomly.

Pair Corralation between Xtrackers ShortDAX and Walmart

Assuming the 90 days trading horizon Xtrackers ShortDAX is expected to under-perform the Walmart. In addition to that, Xtrackers ShortDAX is 1.4 times more volatile than Walmart. It trades about -0.08 of its total potential returns per unit of risk. Walmart is currently generating about 0.32 per unit of volatility. If you would invest  6,967  in Walmart on September 4, 2024 and sell it today you would earn a total of  1,841  from holding Walmart or generate 26.42% return on investment over 90 days.

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

Xtrackers ShortDAX  vs.  Walmart

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.

Walmart

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Walmart reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xtrackers ShortDAX and Walmart

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

The idea behind Xtrackers ShortDAX and Walmart 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.