Correlation Between Xtrackers and Source Markets

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

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

Diversification Opportunities for Xtrackers and Source Markets

-0.56

Correlation Coefficient

Xtrackers  Source Markets

Excellent diversification

The 3 months correlation between Xtrackers and Source is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers SP and Source Markets plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Source Markets plc and Xtrackers 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 SP are associated (or correlated) with Source Markets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Source Markets plc has no effect on the direction of Xtrackers i.e., Xtrackers and Source Markets go up and down completely randomly.

Pair Corralation between Xtrackers and Source Markets

Assuming the 90 days trading horizon Xtrackers SP is expected to generate 0.57 times more return on investment than Source Markets. However, Xtrackers SP is 1.76 times less risky than Source Markets. It trades about -0.01 of its potential returns per unit of risk. Source Markets plc is currently generating about -0.05 per unit of risk. If you would invest  645.00  in Xtrackers SP on September 30, 2024 and sell it today you would lose (12.00) from holding Xtrackers SP or give up 1.86% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.21%
Values	Daily Returns

Xtrackers SP  vs.  Source Markets plc

Xtrackers SP

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers SP are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Xtrackers is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Source Markets plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Source Markets plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Etf's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the Exchange Traded Fund stockholders.

Pair Trading with Xtrackers and Source Markets

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

The idea behind Xtrackers SP and Source Markets plc 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.

Check out your portfolio center.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.