Correlation Between Xtrackers MSCI and LS 1x

Can any of the company-specific risk be diversified away by investing in both Xtrackers MSCI and LS 1x 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 LS 1x into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Xtrackers MSCI and LS 1x Amazon, you can compare the effects of market volatilities on Xtrackers MSCI and LS 1x 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 LS 1x. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers MSCI and LS 1x.

Diversification Opportunities for Xtrackers MSCI and LS 1x

-0.26

Correlation Coefficient

Xtrackers MSCI  LS 1x

Very good diversification

The 3 months correlation between Xtrackers and 1AMZ is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers MSCI and LS 1x Amazon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LS 1x Amazon 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 are associated (or correlated) with LS 1x. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LS 1x Amazon has no effect on the direction of Xtrackers MSCI i.e., Xtrackers MSCI and LS 1x go up and down completely randomly.

Pair Corralation between Xtrackers MSCI and LS 1x

Assuming the 90 days trading horizon Xtrackers MSCI is expected to generate 2.85 times less return on investment than LS 1x. But when comparing it to its historical volatility, Xtrackers MSCI is 1.15 times less risky than LS 1x. It trades about 0.08 of its potential returns per unit of risk. LS 1x Amazon is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  566.00  in LS 1x Amazon on September 12, 2024 and sell it today you would earn a total of  130.00  from holding LS 1x Amazon or generate 22.97% return on investment over 90 days.

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

Xtrackers MSCI  vs.  LS 1x Amazon

Xtrackers MSCI

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers MSCI are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Xtrackers MSCI may actually be approaching a critical reversion point that can send shares even higher in January 2025.

LS 1x Amazon

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in LS 1x Amazon are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, LS 1x unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xtrackers MSCI and LS 1x

The main advantage of trading using opposite Xtrackers MSCI and LS 1x positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers MSCI position performs unexpectedly, LS 1x 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 LS 1x will offset losses from the drop in LS 1x's long position.

The idea behind Xtrackers MSCI and LS 1x Amazon 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.