Correlation Between Xtrackers MSCI and ALPS International

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

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

Diversification Opportunities for Xtrackers MSCI and ALPS International

0.96

Correlation Coefficient

Xtrackers MSCI  ALPS International

Almost no diversification

The 3 months correlation between Xtrackers and ALPS is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers MSCI EAFE and ALPS International Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALPS International Sector and Xtrackers MSCI 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 MSCI EAFE are associated (or correlated) with ALPS International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALPS International Sector has no effect on the direction of Xtrackers MSCI i.e., Xtrackers MSCI and ALPS International go up and down completely randomly.

Pair Corralation between Xtrackers MSCI and ALPS International

Given the investment horizon of 90 days Xtrackers MSCI EAFE is expected to generate 0.86 times more return on investment than ALPS International. However, Xtrackers MSCI EAFE is 1.16 times less risky than ALPS International. It trades about -0.11 of its potential returns per unit of risk. ALPS International Sector is currently generating about -0.1 per unit of risk. If you would invest  2,636  in Xtrackers MSCI EAFE on September 18, 2024 and sell it today you would lose (141.00) from holding Xtrackers MSCI EAFE or give up 5.35% of portfolio value over 90 days.

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

Xtrackers MSCI EAFE  vs.  ALPS International Sector

Xtrackers MSCI EAFE

Risk-Adjusted Performance

0 of 100

Very Weak

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

ALPS International Sector

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ALPS International Sector has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ALPS International is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Xtrackers MSCI and ALPS International

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

The idea behind Xtrackers MSCI EAFE and ALPS International Sector 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.