Correlation Between Xtrackers MSCI and IQ Candriam

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

Diversification Opportunities for Xtrackers MSCI and IQ Candriam

-0.01

Correlation Coefficient

Xtrackers MSCI  IQ Candriam

Good diversification

The 3 months correlation between Xtrackers and IQSI is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers MSCI USA 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 MSCI 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 MSCI USA 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 MSCI i.e., Xtrackers MSCI and IQ Candriam go up and down completely randomly.

Pair Corralation between Xtrackers MSCI and IQ Candriam

Given the investment horizon of 90 days Xtrackers MSCI USA is expected to generate 1.52 times more return on investment than IQ Candriam. However, Xtrackers MSCI is 1.52 times more volatile than IQ Candriam ESG. It trades about 0.08 of its potential returns per unit of risk. IQ Candriam ESG is currently generating about 0.11 per unit of risk. If you would invest  5,449  in Xtrackers MSCI USA on October 21, 2024 and sell it today you would earn a total of  74.00  from holding Xtrackers MSCI USA or generate 1.36% return on investment over 90 days.

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

Xtrackers MSCI USA  vs.  IQ Candriam ESG

Xtrackers MSCI USA

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers MSCI USA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Xtrackers MSCI is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

IQ Candriam ESG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IQ Candriam ESG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, IQ Candriam is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Xtrackers MSCI and IQ Candriam

The main advantage of trading using opposite Xtrackers MSCI and IQ Candriam positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers MSCI 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 MSCI USA 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.