Correlation Between IShares 20 and Xtrackers USD

Can any of the company-specific risk be diversified away by investing in both IShares 20 and Xtrackers USD 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 20 and Xtrackers USD into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares 20 Year and Xtrackers USD High, you can compare the effects of market volatilities on IShares 20 and Xtrackers USD 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 20 with a short position of Xtrackers USD. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares 20 and Xtrackers USD.

Diversification Opportunities for IShares 20 and Xtrackers USD

0.72

Correlation Coefficient

IShares 20  Xtrackers USD

Poor diversification

The 3 months correlation between IShares and Xtrackers is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding iShares 20 Year and Xtrackers USD High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers USD High and IShares 20 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 20 Year are associated (or correlated) with Xtrackers USD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers USD High has no effect on the direction of IShares 20 i.e., IShares 20 and Xtrackers USD go up and down completely randomly.

Pair Corralation between IShares 20 and Xtrackers USD

Considering the 90-day investment horizon iShares 20 Year is expected to generate 2.95 times more return on investment than Xtrackers USD. However, IShares 20 is 2.95 times more volatile than Xtrackers USD High. It trades about 0.07 of its potential returns per unit of risk. Xtrackers USD High is currently generating about 0.07 per unit of risk. If you would invest  8,721  in iShares 20 Year on December 29, 2024 and sell it today you would earn a total of  293.00  from holding iShares 20 Year or generate 3.36% return on investment over 90 days.

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

iShares 20 Year  vs.  Xtrackers USD High

iShares 20 Year

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares 20 Year are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, IShares 20 is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Xtrackers USD High

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers USD High are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, Xtrackers USD is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares 20 and Xtrackers USD

The main advantage of trading using opposite IShares 20 and Xtrackers USD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares 20 position performs unexpectedly, Xtrackers USD 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 USD will offset losses from the drop in Xtrackers USD's long position.

The idea behind iShares 20 Year and Xtrackers USD 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.

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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.