Correlation Between IShares 0 and Xtrackers Short

Can any of the company-specific risk be diversified away by investing in both IShares 0 and Xtrackers Short 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 0 and Xtrackers Short into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares 0 5 Year and Xtrackers Short Duration, you can compare the effects of market volatilities on IShares 0 and Xtrackers Short 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 0 with a short position of Xtrackers Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares 0 and Xtrackers Short.

Diversification Opportunities for IShares 0 and Xtrackers Short

0.92

Correlation Coefficient

IShares 0  Xtrackers Short

Almost no diversification

The 3 months correlation between IShares and Xtrackers is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding iShares 0 5 Year and Xtrackers Short Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers Short Duration and IShares 0 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 0 5 Year are associated (or correlated) with Xtrackers Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers Short Duration has no effect on the direction of IShares 0 i.e., IShares 0 and Xtrackers Short go up and down completely randomly.

Pair Corralation between IShares 0 and Xtrackers Short

Given the investment horizon of 90 days iShares 0 5 Year is expected to under-perform the Xtrackers Short. But the etf apears to be less risky and, when comparing its historical volatility, iShares 0 5 Year is 1.09 times less risky than Xtrackers Short. The etf trades about -0.1 of its potential returns per unit of risk. The Xtrackers Short Duration is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  4,502  in Xtrackers Short Duration on September 22, 2024 and sell it today you would lose (9.00) from holding Xtrackers Short Duration or give up 0.2% of portfolio value over 90 days.

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

iShares 0 5 Year  vs.  Xtrackers Short Duration

iShares 0 5

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days iShares 0 5 Year has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, IShares 0 is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Xtrackers Short Duration

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers Short Duration are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Xtrackers Short is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with IShares 0 and Xtrackers Short

The main advantage of trading using opposite IShares 0 and Xtrackers Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares 0 position performs unexpectedly, Xtrackers Short 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 Short will offset losses from the drop in Xtrackers Short's long position.

The idea behind iShares 0 5 Year and Xtrackers Short Duration 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.