Correlation Between Xtrackers Low and IShares Broad

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

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

Diversification Opportunities for Xtrackers Low and IShares Broad

0.67

Correlation Coefficient

Xtrackers Low  IShares Broad

Poor diversification

The 3 months correlation between Xtrackers and IShares is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers Low Beta and iShares Broad USD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Broad USD and Xtrackers Low 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 Low Beta are associated (or correlated) with IShares Broad. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Broad USD has no effect on the direction of Xtrackers Low i.e., Xtrackers Low and IShares Broad go up and down completely randomly.

Pair Corralation between Xtrackers Low and IShares Broad

Given the investment horizon of 90 days Xtrackers Low is expected to generate 1.38 times less return on investment than IShares Broad. But when comparing it to its historical volatility, Xtrackers Low Beta is 1.11 times less risky than IShares Broad. It trades about 0.08 of its potential returns per unit of risk. iShares Broad USD is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  3,045  in iShares Broad USD on September 25, 2024 and sell it today you would earn a total of  622.00  from holding iShares Broad USD or generate 20.43% return on investment over 90 days.

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

Xtrackers Low Beta  vs.  iShares Broad USD

Xtrackers Low Beta

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xtrackers Low Beta has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental indicators, Xtrackers Low is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

iShares Broad USD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Broad USD has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical indicators, IShares Broad is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Xtrackers Low and IShares Broad

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

The idea behind Xtrackers Low Beta and iShares Broad USD 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.