Correlation Between Xtrackers FTSE and Xtrackers MSCI

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

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

Diversification Opportunities for Xtrackers FTSE and Xtrackers MSCI

0.53

Correlation Coefficient

Xtrackers FTSE  Xtrackers MSCI

Very weak diversification

The 3 months correlation between Xtrackers and Xtrackers is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers FTSE Developed and Xtrackers MSCI Eurozone in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers MSCI Eurozone 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 Developed are associated (or correlated) with Xtrackers MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers MSCI Eurozone has no effect on the direction of Xtrackers FTSE i.e., Xtrackers FTSE and Xtrackers MSCI go up and down completely randomly.

Pair Corralation between Xtrackers FTSE and Xtrackers MSCI

Given the investment horizon of 90 days Xtrackers FTSE is expected to generate 1.57 times less return on investment than Xtrackers MSCI. In addition to that, Xtrackers FTSE is 1.01 times more volatile than Xtrackers MSCI Eurozone. It trades about 0.04 of its total potential returns per unit of risk. Xtrackers MSCI Eurozone is currently generating about 0.06 per unit of volatility. If you would invest  3,711  in Xtrackers MSCI Eurozone on October 10, 2024 and sell it today you would earn a total of  951.00  from holding Xtrackers MSCI Eurozone or generate 25.63% return on investment over 90 days.

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

Xtrackers FTSE Developed  vs.  Xtrackers MSCI Eurozone

Xtrackers FTSE Developed

Risk-Adjusted Performance

0 of 100

Very Weak

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

Xtrackers MSCI Eurozone

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers MSCI Eurozone are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, Xtrackers MSCI is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Xtrackers FTSE and Xtrackers MSCI

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

The idea behind Xtrackers FTSE Developed and Xtrackers MSCI Eurozone 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.