Correlation Between BGF Global and Xtrackers LevDAX

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

By analyzing existing cross correlation between BGF Global Allocation and Xtrackers LevDAX, you can compare the effects of market volatilities on BGF Global and Xtrackers LevDAX 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 BGF Global with a short position of Xtrackers LevDAX. Check out your portfolio center. Please also check ongoing floating volatility patterns of BGF Global and Xtrackers LevDAX.

Diversification Opportunities for BGF Global and Xtrackers LevDAX

0.41

Correlation Coefficient

BGF Global  Xtrackers LevDAX

Very weak diversification

The 3 months correlation between BGF and Xtrackers is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding BGF Global Allocation and Xtrackers LevDAX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers LevDAX and BGF Global 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 BGF Global Allocation are associated (or correlated) with Xtrackers LevDAX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers LevDAX has no effect on the direction of BGF Global i.e., BGF Global and Xtrackers LevDAX go up and down completely randomly.

Pair Corralation between BGF Global and Xtrackers LevDAX

Assuming the 90 days trading horizon BGF Global is expected to generate 91.02 times less return on investment than Xtrackers LevDAX. But when comparing it to its historical volatility, BGF Global Allocation is 3.56 times less risky than Xtrackers LevDAX. It trades about 0.01 of its potential returns per unit of risk. Xtrackers LevDAX is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  18,422  in Xtrackers LevDAX on September 22, 2024 and sell it today you would earn a total of  2,308  from holding Xtrackers LevDAX or generate 12.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

BGF Global Allocation  vs.  Xtrackers LevDAX

BGF Global Allocation

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BGF Global Allocation are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather sound technical and fundamental indicators, BGF Global is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Xtrackers LevDAX

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers LevDAX are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Xtrackers LevDAX reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BGF Global and Xtrackers LevDAX

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

The idea behind BGF Global Allocation and Xtrackers LevDAX 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.