Correlation Between Xtrackers LevDAX and Nucor Corp

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

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

Diversification Opportunities for Xtrackers LevDAX and Nucor Corp

0.6

Correlation Coefficient

Xtrackers LevDAX  Nucor Corp

Poor diversification

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

Pair Corralation between Xtrackers LevDAX and Nucor Corp

Assuming the 90 days trading horizon Xtrackers LevDAX is expected to generate 1.09 times more return on investment than Nucor Corp. However, Xtrackers LevDAX is 1.09 times more volatile than Nucor Corp. It trades about 0.22 of its potential returns per unit of risk. Nucor Corp is currently generating about 0.05 per unit of risk. If you would invest  19,946  in Xtrackers LevDAX on December 23, 2024 and sell it today you would earn a total of  5,964  from holding Xtrackers LevDAX or generate 29.9% 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.  Nucor Corp

Xtrackers LevDAX

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers LevDAX are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Xtrackers LevDAX reported solid returns over the last few months and may actually be approaching a breakup point.

Nucor Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nucor Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Nucor Corp is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Xtrackers LevDAX and Nucor Corp

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

The idea behind Xtrackers LevDAX and Nucor Corp 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.