Correlation Between IShares TecDAX and IShares Core

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

By analyzing existing cross correlation between iShares TecDAX UCITS and iShares Core DAX, you can compare the effects of market volatilities on IShares TecDAX and IShares Core 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 TecDAX with a short position of IShares Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares TecDAX and IShares Core.

Diversification Opportunities for IShares TecDAX and IShares Core

0.87

Correlation Coefficient

IShares TecDAX  IShares Core

Very poor diversification

The 3 months correlation between IShares and IShares is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding iShares TecDAX UCITS and iShares Core DAX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core DAX and IShares TecDAX 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 TecDAX UCITS are associated (or correlated) with IShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core DAX has no effect on the direction of IShares TecDAX i.e., IShares TecDAX and IShares Core go up and down completely randomly.

Pair Corralation between IShares TecDAX and IShares Core

Assuming the 90 days trading horizon IShares TecDAX is expected to generate 2.62 times less return on investment than IShares Core. But when comparing it to its historical volatility, iShares TecDAX UCITS is 1.22 times less risky than IShares Core. It trades about 0.03 of its potential returns per unit of risk. iShares Core DAX is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  15,082  in iShares Core DAX on October 9, 2024 and sell it today you would earn a total of  408.00  from holding iShares Core DAX or generate 2.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.28%
Values	Daily Returns

iShares TecDAX UCITS  vs.  iShares Core DAX

iShares TecDAX UCITS

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days iShares TecDAX UCITS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, IShares TecDAX is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

iShares Core DAX

Risk-Adjusted Performance

0 of 100

Insignificant

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

Pair Trading with IShares TecDAX and IShares Core

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

The idea behind iShares TecDAX UCITS and iShares Core DAX 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.