Correlation Between IShares SP and DGB Group

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

By analyzing existing cross correlation between iShares SP 500 and DGB Group NV, you can compare the effects of market volatilities on IShares SP and DGB Group 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 SP with a short position of DGB Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SP and DGB Group.

Diversification Opportunities for IShares SP and DGB Group

-0.76

Correlation Coefficient

IShares SP  DGB Group

Pay attention - limited upside

The 3 months correlation between IShares and DGB is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP 500 and DGB Group NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DGB Group NV and IShares SP 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 SP 500 are associated (or correlated) with DGB Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DGB Group NV has no effect on the direction of IShares SP i.e., IShares SP and DGB Group go up and down completely randomly.

Pair Corralation between IShares SP and DGB Group

Assuming the 90 days trading horizon iShares SP 500 is expected to under-perform the DGB Group. But the etf apears to be less risky and, when comparing its historical volatility, iShares SP 500 is 4.91 times less risky than DGB Group. The etf trades about -0.25 of its potential returns per unit of risk. The DGB Group NV is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  66.00  in DGB Group NV on September 17, 2024 and sell it today you would earn a total of  22.00  from holding DGB Group NV or generate 33.33% return on investment over 90 days.

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

iShares SP 500  vs.  DGB Group NV

iShares SP 500

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Etf's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

DGB Group NV

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DGB Group NV are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental drivers, DGB Group unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares SP and DGB Group

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

The idea behind iShares SP 500 and DGB Group NV 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.