Correlation Between Xtrackers LevDAX and TUI AG

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

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

Diversification Opportunities for Xtrackers LevDAX and TUI AG

0.65

Correlation Coefficient

Xtrackers LevDAX  TUI AG

Poor diversification

The 3 months correlation between Xtrackers and TUI is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers LevDAX and TUI AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TUI AG 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 TUI AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TUI AG has no effect on the direction of Xtrackers LevDAX i.e., Xtrackers LevDAX and TUI AG go up and down completely randomly.

Pair Corralation between Xtrackers LevDAX and TUI AG

Assuming the 90 days trading horizon Xtrackers LevDAX is expected to generate 45.63 times less return on investment than TUI AG. But when comparing it to its historical volatility, Xtrackers LevDAX is 1.16 times less risky than TUI AG. It trades about 0.01 of its potential returns per unit of risk. TUI AG is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  597.00  in TUI AG on September 2, 2024 and sell it today you would earn a total of  154.00  from holding TUI AG or generate 25.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.48%
Values	Daily Returns

Xtrackers LevDAX  vs.  TUI AG

Xtrackers LevDAX

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xtrackers LevDAX has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Xtrackers LevDAX is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

TUI AG

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TUI AG are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, TUI AG exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xtrackers LevDAX and TUI AG

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

The idea behind Xtrackers LevDAX and TUI AG 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.