Correlation Between Xtrackers LevDAX and BerolinaCapital Premium

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

By analyzing existing cross correlation between Xtrackers LevDAX and BerolinaCapital Premium, you can compare the effects of market volatilities on Xtrackers LevDAX and BerolinaCapital Premium 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 LevDAX with a short position of BerolinaCapital Premium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers LevDAX and BerolinaCapital Premium.

Diversification Opportunities for Xtrackers LevDAX and BerolinaCapital Premium

0.71

Correlation Coefficient

Xtrackers LevDAX  BerolinaCapital Premium

Poor diversification

The 3 months correlation between Xtrackers and BerolinaCapital is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers LevDAX and BerolinaCapital Premium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BerolinaCapital Premium and Xtrackers LevDAX 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 LevDAX are associated (or correlated) with BerolinaCapital Premium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BerolinaCapital Premium has no effect on the direction of Xtrackers LevDAX i.e., Xtrackers LevDAX and BerolinaCapital Premium go up and down completely randomly.

Pair Corralation between Xtrackers LevDAX and BerolinaCapital Premium

Assuming the 90 days trading horizon Xtrackers LevDAX is expected to generate 2.99 times more return on investment than BerolinaCapital Premium. However, Xtrackers LevDAX is 2.99 times more volatile than BerolinaCapital Premium. It trades about 0.19 of its potential returns per unit of risk. BerolinaCapital Premium is currently generating about 0.14 per unit of risk. If you would invest  18,422  in Xtrackers LevDAX on September 23, 2024 and sell it today you would earn a total of  1,583  from holding Xtrackers LevDAX or generate 8.59% return on investment over 90 days.

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

Xtrackers LevDAX  vs.  BerolinaCapital Premium

Xtrackers LevDAX

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers LevDAX are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Xtrackers LevDAX may actually be approaching a critical reversion point that can send shares even higher in January 2025.

BerolinaCapital Premium

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BerolinaCapital Premium are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. Despite nearly stable fundamental indicators, BerolinaCapital Premium 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 LevDAX and BerolinaCapital Premium

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

The idea behind Xtrackers LevDAX and BerolinaCapital Premium 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.