Correlation Between Xtrackers LevDAX and Plug Power

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

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

Diversification Opportunities for Xtrackers LevDAX and Plug Power

0.72

Correlation Coefficient

Xtrackers LevDAX  Plug Power

Poor diversification

The 3 months correlation between Xtrackers and Plug is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers LevDAX and Plug Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plug Power 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 Plug Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plug Power has no effect on the direction of Xtrackers LevDAX i.e., Xtrackers LevDAX and Plug Power go up and down completely randomly.

Pair Corralation between Xtrackers LevDAX and Plug Power

Assuming the 90 days trading horizon Xtrackers LevDAX is expected to under-perform the Plug Power. But the etf apears to be less risky and, when comparing its historical volatility, Xtrackers LevDAX is 7.43 times less risky than Plug Power. The etf trades about -0.21 of its potential returns per unit of risk. The Plug Power is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  195.00  in Plug Power on October 5, 2024 and sell it today you would earn a total of  35.00  from holding Plug Power or generate 17.95% 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.  Plug Power

Xtrackers LevDAX

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Xtrackers LevDAX has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly unsteady basic indicators, Xtrackers LevDAX may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Plug Power

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Plug Power has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather fragile basic indicators, Plug Power exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xtrackers LevDAX and Plug Power

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

The idea behind Xtrackers LevDAX and Plug Power 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.