Correlation Between Formidable Fortress and Xtrackers Municipal

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

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

Diversification Opportunities for Formidable Fortress and Xtrackers Municipal

0.21

Correlation Coefficient

Formidable Fortress  Xtrackers Municipal

Modest diversification

The 3 months correlation between Formidable and Xtrackers is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Formidable Fortress ETF and Xtrackers Municipal Infrastruc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers Municipal and Formidable Fortress 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 Formidable Fortress ETF are associated (or correlated) with Xtrackers Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers Municipal has no effect on the direction of Formidable Fortress i.e., Formidable Fortress and Xtrackers Municipal go up and down completely randomly.

Pair Corralation between Formidable Fortress and Xtrackers Municipal

Given the investment horizon of 90 days Formidable Fortress ETF is expected to under-perform the Xtrackers Municipal. In addition to that, Formidable Fortress is 1.29 times more volatile than Xtrackers Municipal Infrastructure. It trades about -0.46 of its total potential returns per unit of risk. Xtrackers Municipal Infrastructure is currently generating about -0.21 per unit of volatility. If you would invest  2,573  in Xtrackers Municipal Infrastructure on September 25, 2024 and sell it today you would lose (54.00) from holding Xtrackers Municipal Infrastructure or give up 2.1% of portfolio value over 90 days.

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

Formidable Fortress ETF  vs.  Xtrackers Municipal Infrastruc

Formidable Fortress ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Formidable Fortress ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Formidable Fortress is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Xtrackers Municipal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xtrackers Municipal Infrastructure has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Xtrackers Municipal is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Formidable Fortress and Xtrackers Municipal

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

The idea behind Formidable Fortress ETF and Xtrackers Municipal Infrastructure 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.