Correlation Between Xtrackers LevDAX and IncomeShares Microsoft

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

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

Diversification Opportunities for Xtrackers LevDAX and IncomeShares Microsoft

0.71

Correlation Coefficient

Xtrackers LevDAX  IncomeShares Microsoft

Poor diversification

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

Pair Corralation between Xtrackers LevDAX and IncomeShares Microsoft

Assuming the 90 days trading horizon Xtrackers LevDAX is expected to under-perform the IncomeShares Microsoft. In addition to that, Xtrackers LevDAX is 1.05 times more volatile than IncomeShares Microsoft Options. It trades about -0.03 of its total potential returns per unit of risk. IncomeShares Microsoft Options is currently generating about 0.07 per unit of volatility. If you would invest  941.00  in IncomeShares Microsoft Options on October 3, 2024 and sell it today you would earn a total of  11.00  from holding IncomeShares Microsoft Options or generate 1.17% 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.  IncomeShares Microsoft Options

Xtrackers LevDAX

Risk-Adjusted Performance

6 of 100

Modest

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 February 2025.

IncomeShares Microsoft

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in IncomeShares Microsoft Options are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, IncomeShares Microsoft may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Xtrackers LevDAX and IncomeShares Microsoft

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

The idea behind Xtrackers LevDAX and IncomeShares Microsoft Options 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.