Correlation Between Xtrackers High and IShares Interest

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

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

Diversification Opportunities for Xtrackers High and IShares Interest

0.89

Correlation Coefficient

Xtrackers High  IShares Interest

Very poor diversification

The 3 months correlation between Xtrackers and IShares is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers High Beta and iShares Interest Rate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Interest Rate and Xtrackers High 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 High Beta are associated (or correlated) with IShares Interest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Interest Rate has no effect on the direction of Xtrackers High i.e., Xtrackers High and IShares Interest go up and down completely randomly.

Pair Corralation between Xtrackers High and IShares Interest

Given the investment horizon of 90 days Xtrackers High Beta is expected to generate 1.13 times more return on investment than IShares Interest. However, Xtrackers High is 1.13 times more volatile than iShares Interest Rate. It trades about 0.31 of its potential returns per unit of risk. iShares Interest Rate is currently generating about 0.32 per unit of risk. If you would invest  4,200  in Xtrackers High Beta on September 3, 2024 and sell it today you would earn a total of  60.00  from holding Xtrackers High Beta or generate 1.43% return on investment over 90 days.

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

Xtrackers High Beta  vs.  iShares Interest Rate

Xtrackers High Beta

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers High Beta are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Xtrackers High is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

iShares Interest Rate

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Interest Rate are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical and fundamental indicators, IShares Interest is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Xtrackers High and IShares Interest

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

The idea behind Xtrackers High Beta and iShares Interest Rate 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.