Correlation Between Xtrackers USD and Vanguard

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

By analyzing existing cross correlation between Xtrackers USD Corporate and Vanguard SP 500, you can compare the effects of market volatilities on Xtrackers USD and Vanguard 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 USD with a short position of Vanguard. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers USD and Vanguard.

Diversification Opportunities for Xtrackers USD and Vanguard

0.05

Correlation Coefficient

Xtrackers USD  Vanguard

Significant diversification

The 3 months correlation between Xtrackers and Vanguard is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers USD Corporate and Vanguard SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard SP 500 and Xtrackers USD 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 USD Corporate are associated (or correlated) with Vanguard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard SP 500 has no effect on the direction of Xtrackers USD i.e., Xtrackers USD and Vanguard go up and down completely randomly.

Pair Corralation between Xtrackers USD and Vanguard

Assuming the 90 days trading horizon Xtrackers USD Corporate is expected to under-perform the Vanguard. In addition to that, Xtrackers USD is 3.1 times more volatile than Vanguard SP 500. It trades about -0.05 of its total potential returns per unit of risk. Vanguard SP 500 is currently generating about 0.16 per unit of volatility. If you would invest  9,452  in Vanguard SP 500 on October 11, 2024 and sell it today you would earn a total of  784.00  from holding Vanguard SP 500 or generate 8.29% return on investment over 90 days.

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

Xtrackers USD Corporate  vs.  Vanguard SP 500

Xtrackers USD Corporate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xtrackers USD Corporate has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal 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.

Vanguard SP 500

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard SP 500 are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Vanguard may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Xtrackers USD and Vanguard

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

The idea behind Xtrackers USD Corporate and Vanguard SP 500 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.