Correlation Between IShares Core and Deka MDAX

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

By analyzing existing cross correlation between iShares Core MSCI and Deka MDAX UCITS, you can compare the effects of market volatilities on IShares Core and Deka MDAX 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 IShares Core with a short position of Deka MDAX. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and Deka MDAX.

Diversification Opportunities for IShares Core and Deka MDAX

0.63

Correlation Coefficient

IShares Core  Deka MDAX

Poor diversification

The 3 months correlation between IShares and Deka is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core MSCI and Deka MDAX UCITS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deka MDAX UCITS and IShares Core 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 iShares Core MSCI are associated (or correlated) with Deka MDAX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deka MDAX UCITS has no effect on the direction of IShares Core i.e., IShares Core and Deka MDAX go up and down completely randomly.

Pair Corralation between IShares Core and Deka MDAX

Assuming the 90 days trading horizon iShares Core MSCI is expected to generate 1.16 times more return on investment than Deka MDAX. However, IShares Core is 1.16 times more volatile than Deka MDAX UCITS. It trades about 0.08 of its potential returns per unit of risk. Deka MDAX UCITS is currently generating about -0.02 per unit of risk. If you would invest  3,174  in iShares Core MSCI on September 19, 2024 and sell it today you would earn a total of  159.00  from holding iShares Core MSCI or generate 5.01% return on investment over 90 days.

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

iShares Core MSCI  vs.  Deka MDAX UCITS

iShares Core MSCI

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core MSCI are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, IShares Core is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Deka MDAX UCITS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Deka MDAX UCITS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Deka MDAX is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with IShares Core and Deka MDAX

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

The idea behind iShares Core MSCI and Deka MDAX UCITS 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.