Correlation Between Xtrackers USD and Principal Active

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

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

Diversification Opportunities for Xtrackers USD and Principal Active

0.96

Correlation Coefficient

Xtrackers USD  Principal Active

Almost no diversification

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

Pair Corralation between Xtrackers USD and Principal Active

Given the investment horizon of 90 days Xtrackers USD is expected to generate 1.08 times less return on investment than Principal Active. In addition to that, Xtrackers USD is 1.01 times more volatile than Principal Active High. It trades about 0.11 of its total potential returns per unit of risk. Principal Active High is currently generating about 0.12 per unit of volatility. If you would invest  1,579  in Principal Active High on November 19, 2024 and sell it today you would earn a total of  362.00  from holding Principal Active High or generate 22.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.8%
Values	Daily Returns

Xtrackers USD High  vs.  Principal Active High

Xtrackers USD High

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers USD High are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, Xtrackers USD is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Principal Active High

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Principal Active High are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, Principal Active is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Xtrackers USD and Principal Active

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

The idea behind Xtrackers USD High and Principal Active High 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.