Correlation Between Xtrackers FTSE and Xtrackers LevDAX

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

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

Diversification Opportunities for Xtrackers FTSE and Xtrackers LevDAX

-0.08

Correlation Coefficient

Xtrackers FTSE  Xtrackers LevDAX

Good diversification

The 3 months correlation between Xtrackers and Xtrackers is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers FTSE and Xtrackers LevDAX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers LevDAX and Xtrackers FTSE 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 FTSE are associated (or correlated) with Xtrackers LevDAX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers LevDAX has no effect on the direction of Xtrackers FTSE i.e., Xtrackers FTSE and Xtrackers LevDAX go up and down completely randomly.

Pair Corralation between Xtrackers FTSE and Xtrackers LevDAX

Assuming the 90 days trading horizon Xtrackers FTSE is expected to under-perform the Xtrackers LevDAX. In addition to that, Xtrackers FTSE is 1.19 times more volatile than Xtrackers LevDAX. It trades about -0.05 of its total potential returns per unit of risk. Xtrackers LevDAX is currently generating about 0.07 per unit of volatility. If you would invest  18,650  in Xtrackers LevDAX on October 8, 2024 and sell it today you would earn a total of  1,294  from holding Xtrackers LevDAX or generate 6.94% return on investment over 90 days.

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

Xtrackers FTSE  vs.  Xtrackers LevDAX

Xtrackers FTSE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xtrackers FTSE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Etf's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Xtrackers LevDAX

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers LevDAX are ranked lower than 5 (%) 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.

Pair Trading with Xtrackers FTSE and Xtrackers LevDAX

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

The idea behind Xtrackers FTSE and Xtrackers LevDAX 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.