Correlation Between Xtrackers Short and FlexShares High

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

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

Diversification Opportunities for Xtrackers Short and FlexShares High

0.97

Correlation Coefficient

Xtrackers Short  FlexShares High

Almost no diversification

The 3 months correlation between Xtrackers and FlexShares is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers Short Duration and FlexShares High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares High Yield and Xtrackers Short 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 Xtrackers Short Duration are associated (or correlated) with FlexShares High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares High Yield has no effect on the direction of Xtrackers Short i.e., Xtrackers Short and FlexShares High go up and down completely randomly.

Pair Corralation between Xtrackers Short and FlexShares High

Given the investment horizon of 90 days Xtrackers Short Duration is expected to generate 0.79 times more return on investment than FlexShares High. However, Xtrackers Short Duration is 1.27 times less risky than FlexShares High. It trades about -0.07 of its potential returns per unit of risk. FlexShares High Yield is currently generating about -0.09 per unit of risk. If you would invest  4,487  in Xtrackers Short Duration on September 28, 2024 and sell it today you would lose (17.00) from holding Xtrackers Short Duration or give up 0.38% of portfolio value over 90 days.

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

Xtrackers Short Duration  vs.  FlexShares High Yield

Xtrackers Short Duration

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers Short Duration are ranked lower than 2 (%) 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 latest stock price mess, may contribute to short-term losses for the institutional investors.

FlexShares High Yield

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days FlexShares High Yield has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, FlexShares High is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Xtrackers Short and FlexShares High

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

The idea behind Xtrackers Short Duration and FlexShares High Yield 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .