Correlation Between Xtrackers and IQ Candriam

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

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

Diversification Opportunities for Xtrackers and IQ Candriam

0.99

Correlation Coefficient

Xtrackers  IQ Candriam

No risk reduction

The 3 months correlation between Xtrackers and IQSU is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers SP 500 and IQ Candriam ESG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IQ Candriam ESG and Xtrackers 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 SP 500 are associated (or correlated) with IQ Candriam. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IQ Candriam ESG has no effect on the direction of Xtrackers i.e., Xtrackers and IQ Candriam go up and down completely randomly.

Pair Corralation between Xtrackers and IQ Candriam

Given the investment horizon of 90 days Xtrackers SP 500 is expected to generate 1.01 times more return on investment than IQ Candriam. However, Xtrackers is 1.01 times more volatile than IQ Candriam ESG. It trades about -0.07 of its potential returns per unit of risk. IQ Candriam ESG is currently generating about -0.08 per unit of risk. 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	100.0%
Values	Daily Returns

Xtrackers SP 500  vs.  IQ Candriam ESG

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.

IQ Candriam ESG

Risk-Adjusted Performance

Very Weak

Over the last 90 days IQ Candriam ESG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, IQ Candriam is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Xtrackers and IQ Candriam

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

The idea behind Xtrackers SP 500 and IQ Candriam ESG 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.

Check out your portfolio center.

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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.