Correlation Between Xtrackers ShortDAX and Xtrackers MSCI

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

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

Diversification Opportunities for Xtrackers ShortDAX and Xtrackers MSCI

-0.69

Correlation Coefficient

Xtrackers ShortDAX  Xtrackers MSCI

Excellent diversification

The 3 months correlation between Xtrackers and Xtrackers is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers ShortDAX and Xtrackers MSCI World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers MSCI World 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 Xtrackers MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers MSCI World has no effect on the direction of Xtrackers ShortDAX i.e., Xtrackers ShortDAX and Xtrackers MSCI go up and down completely randomly.

Pair Corralation between Xtrackers ShortDAX and Xtrackers MSCI

Assuming the 90 days trading horizon Xtrackers ShortDAX is expected to under-perform the Xtrackers MSCI. In addition to that, Xtrackers ShortDAX is 1.19 times more volatile than Xtrackers MSCI World. It trades about -0.09 of its total potential returns per unit of risk. Xtrackers MSCI World is currently generating about 0.18 per unit of volatility. If you would invest  8,057  in Xtrackers MSCI World on September 23, 2024 and sell it today you would earn a total of  1,209  from holding Xtrackers MSCI World or generate 15.01% 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.  Xtrackers MSCI 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 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.

Xtrackers MSCI World

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers MSCI World are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Xtrackers MSCI reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xtrackers ShortDAX and Xtrackers MSCI

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

The idea behind Xtrackers ShortDAX and Xtrackers MSCI 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.