Correlation Between Xtrackers Russell and Xtrackers FTSE

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

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

Diversification Opportunities for Xtrackers Russell and Xtrackers FTSE

0.12

Correlation Coefficient

Xtrackers Russell  Xtrackers FTSE

Average diversification

The 3 months correlation between Xtrackers and Xtrackers is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers Russell Multifactor and Xtrackers FTSE Developed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers FTSE Developed and Xtrackers Russell 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 Russell Multifactor are associated (or correlated) with Xtrackers FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers FTSE Developed has no effect on the direction of Xtrackers Russell i.e., Xtrackers Russell and Xtrackers FTSE go up and down completely randomly.

Pair Corralation between Xtrackers Russell and Xtrackers FTSE

Given the investment horizon of 90 days Xtrackers Russell Multifactor is expected to generate 1.0 times more return on investment than Xtrackers FTSE. However, Xtrackers Russell Multifactor is 1.0 times less risky than Xtrackers FTSE. It trades about 0.07 of its potential returns per unit of risk. Xtrackers FTSE Developed is currently generating about 0.04 per unit of risk. If you would invest  4,152  in Xtrackers Russell Multifactor on October 10, 2024 and sell it today you would earn a total of  1,232  from holding Xtrackers Russell Multifactor or generate 29.67% return on investment over 90 days.

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

Xtrackers Russell Multifactor  vs.  Xtrackers FTSE Developed

Xtrackers Russell

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xtrackers Russell Multifactor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Xtrackers Russell is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

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.

Pair Trading with Xtrackers Russell and Xtrackers FTSE

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

The idea behind Xtrackers Russell Multifactor and Xtrackers FTSE Developed 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.