Correlation Between Xtrackers Short and Principal Active

Can any of the company-specific risk be diversified away by investing in both Xtrackers Short and Principal Active 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 Principal Active 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 Principal Active High, you can compare the effects of market volatilities on Xtrackers Short and Principal Active 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 Principal Active. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers Short and Principal Active.

Diversification Opportunities for Xtrackers Short and Principal Active

0.95

Correlation Coefficient

Xtrackers Short  Principal Active

Almost no diversification

The 3 months correlation between Xtrackers and Principal is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers Short Duration and Principal Active High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Principal Active High 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 Principal Active. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Principal Active High has no effect on the direction of Xtrackers Short i.e., Xtrackers Short and Principal Active go up and down completely randomly.

Pair Corralation between Xtrackers Short and Principal Active

Given the investment horizon of 90 days Xtrackers Short Duration is expected to generate 1.05 times more return on investment than Principal Active. However, Xtrackers Short is 1.05 times more volatile than Principal Active High. It trades about 0.06 of its potential returns per unit of risk. Principal Active High is currently generating about 0.04 per unit of risk. If you would invest  4,420  in Xtrackers Short Duration on December 30, 2024 and sell it today you would earn a total of  40.00  from holding Xtrackers Short Duration or generate 0.9% return on investment over 90 days.

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

Xtrackers Short Duration  vs.  Principal Active High

Xtrackers Short Duration

Risk-Adjusted Performance

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 latest stock price mess, may contribute to short-term losses for the institutional investors.

Principal Active High

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Principal Active High are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, Principal Active is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Xtrackers Short and Principal Active

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

The idea behind Xtrackers Short Duration and Principal Active High 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.