Correlation Between Main International and Xtrackers California

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

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

Diversification Opportunities for Main International and Xtrackers California

0.2

Correlation Coefficient

Main International  Xtrackers California

Modest diversification

The 3 months correlation between Main and Xtrackers is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Main International ETF and Xtrackers California Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers California and Main International 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 Main International ETF are associated (or correlated) with Xtrackers California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers California has no effect on the direction of Main International i.e., Main International and Xtrackers California go up and down completely randomly.

Pair Corralation between Main International and Xtrackers California

Given the investment horizon of 90 days Main International ETF is expected to generate 2.76 times more return on investment than Xtrackers California. However, Main International is 2.76 times more volatile than Xtrackers California Municipal. It trades about 0.02 of its potential returns per unit of risk. Xtrackers California Municipal is currently generating about -0.04 per unit of risk. If you would invest  2,256  in Main International ETF on September 20, 2024 and sell it today you would earn a total of  6.00  from holding Main International ETF or generate 0.27% return on investment over 90 days.

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

Main International ETF  vs.  Xtrackers California Municipal

Main International ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Main International ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Main International is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Xtrackers California

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xtrackers California Municipal has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Xtrackers California is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Main International and Xtrackers California

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

The idea behind Main International ETF and Xtrackers California Municipal 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.