Correlation Between Xtrackers LevDAX and Rock Tech

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

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

Diversification Opportunities for Xtrackers LevDAX and Rock Tech

-0.51

Correlation Coefficient

Xtrackers LevDAX  Rock Tech

Excellent diversification

The 3 months correlation between Xtrackers and Rock is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers LevDAX and Rock Tech Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rock Tech Lithium 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 Rock Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rock Tech Lithium has no effect on the direction of Xtrackers LevDAX i.e., Xtrackers LevDAX and Rock Tech go up and down completely randomly.

Pair Corralation between Xtrackers LevDAX and Rock Tech

Assuming the 90 days trading horizon Xtrackers LevDAX is expected to generate 1.31 times less return on investment than Rock Tech. But when comparing it to its historical volatility, Xtrackers LevDAX is 2.35 times less risky than Rock Tech. It trades about 0.06 of its potential returns per unit of risk. Rock Tech Lithium is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  86.00  in Rock Tech Lithium on October 10, 2024 and sell it today you would earn a total of  3.00  from holding Rock Tech Lithium or generate 3.49% return on investment over 90 days.

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

Xtrackers LevDAX  vs.  Rock Tech Lithium

Xtrackers LevDAX

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers LevDAX are ranked lower than 4 (%) 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 February 2025.

Rock Tech Lithium

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Rock Tech Lithium are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Rock Tech may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Xtrackers LevDAX and Rock Tech

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

The idea behind Xtrackers LevDAX and Rock Tech Lithium 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .