Correlation Between HCM Defender and Xtrackers

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

By analyzing existing cross correlation between HCM Defender 100 and Xtrackers SP 500, you can compare the effects of market volatilities on HCM Defender and Xtrackers 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 HCM Defender with a short position of Xtrackers. Check out your portfolio center. Please also check ongoing floating volatility patterns of HCM Defender and Xtrackers.

Diversification Opportunities for HCM Defender and Xtrackers

0.93

Correlation Coefficient

HCM Defender  Xtrackers

Almost no diversification

The 3 months correlation between HCM and Xtrackers is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding HCM Defender 100 and Xtrackers SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers SP 500 and HCM Defender 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 HCM Defender 100 are associated (or correlated) with Xtrackers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers SP 500 has no effect on the direction of HCM Defender i.e., HCM Defender and Xtrackers go up and down completely randomly.

Pair Corralation between HCM Defender and Xtrackers

Considering the 90-day investment horizon HCM Defender 100 is expected to under-perform the Xtrackers. In addition to that, HCM Defender is 1.53 times more volatile than Xtrackers SP 500. It trades about -0.16 of its total potential returns per unit of risk. Xtrackers SP 500 is currently generating about -0.07 per unit of volatility. If you would invest  5,336  in Xtrackers SP 500 on December 28, 2024 and sell it today you would lose (230.00) from holding Xtrackers SP 500 or give up 4.31% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.36%
Values	Daily Returns

HCM Defender 100  vs.  Xtrackers SP 500

HCM Defender 100

Risk-Adjusted Performance

Very Weak

Over the last 90 days HCM Defender 100 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Etf's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the Etf traders.

Xtrackers SP 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days Xtrackers SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Xtrackers is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with HCM Defender and Xtrackers

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

The idea behind HCM Defender 100 and Xtrackers SP 500 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.