Correlation Between IShares TecDAX and Xtrackers MSCI

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

Diversification Opportunities for IShares TecDAX and Xtrackers MSCI

-0.13

Correlation Coefficient

IShares TecDAX  Xtrackers MSCI

Good diversification

The 3 months correlation between IShares and Xtrackers is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding iShares TecDAX UCITS and Xtrackers MSCI USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers MSCI USA 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 Xtrackers MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers MSCI USA has no effect on the direction of IShares TecDAX i.e., IShares TecDAX and Xtrackers MSCI go up and down completely randomly.

Pair Corralation between IShares TecDAX and Xtrackers MSCI

Assuming the 90 days trading horizon iShares TecDAX UCITS is expected to generate 1.09 times more return on investment than Xtrackers MSCI. However, IShares TecDAX is 1.09 times more volatile than Xtrackers MSCI USA. It trades about 0.15 of its potential returns per unit of risk. Xtrackers MSCI USA is currently generating about -0.11 per unit of risk. If you would invest  3,052  in iShares TecDAX UCITS on December 24, 2024 and sell it today you would earn a total of  285.00  from holding iShares TecDAX UCITS or generate 9.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.31%
Values	Daily Returns

iShares TecDAX UCITS  vs.  Xtrackers MSCI USA

iShares TecDAX UCITS

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares TecDAX UCITS are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, IShares TecDAX may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Xtrackers MSCI USA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Xtrackers MSCI USA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the fund sophisticated investors.

Pair Trading with IShares TecDAX and Xtrackers MSCI

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

The idea behind iShares TecDAX UCITS and Xtrackers MSCI USA 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.