Correlation Between Xtrackers MSCI and Xtrackers USD

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

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

Diversification Opportunities for Xtrackers MSCI and Xtrackers USD

0.16

Correlation Coefficient

Xtrackers MSCI  Xtrackers USD

Average diversification

The 3 months correlation between Xtrackers and Xtrackers is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers MSCI World and Xtrackers USD Corporate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers USD Corporate 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 World 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 Corporate has no effect on the direction of Xtrackers MSCI i.e., Xtrackers MSCI and Xtrackers USD go up and down completely randomly.

Pair Corralation between Xtrackers MSCI and Xtrackers USD

Assuming the 90 days trading horizon Xtrackers MSCI is expected to generate 3.99 times less return on investment than Xtrackers USD. But when comparing it to its historical volatility, Xtrackers MSCI World is 2.82 times less risky than Xtrackers USD. It trades about 0.01 of its potential returns per unit of risk. Xtrackers USD Corporate is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,264  in Xtrackers USD Corporate on October 27, 2024 and sell it today you would earn a total of  13.00  from holding Xtrackers USD Corporate or generate 1.03% return on investment over 90 days.

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

Xtrackers MSCI World  vs.  Xtrackers USD Corporate

Xtrackers MSCI World

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers MSCI World are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Xtrackers MSCI is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Xtrackers USD Corporate

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers USD Corporate are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Xtrackers USD is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Xtrackers MSCI and Xtrackers USD

The main advantage of trading using opposite Xtrackers MSCI and Xtrackers USD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers MSCI 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 Xtrackers MSCI World and Xtrackers USD Corporate 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.