Correlation Between Xtrackers Nikkei and VanEck Crypto

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

By analyzing existing cross correlation between Xtrackers Nikkei 225 and VanEck Crypto and, you can compare the effects of market volatilities on Xtrackers Nikkei and VanEck Crypto 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 Nikkei with a short position of VanEck Crypto. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers Nikkei and VanEck Crypto.

Diversification Opportunities for Xtrackers Nikkei and VanEck Crypto

0.4

Correlation Coefficient

Xtrackers Nikkei  VanEck Crypto

Very weak diversification

The 3 months correlation between Xtrackers and VanEck is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers Nikkei 225 and VanEck Crypto and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Crypto and Xtrackers Nikkei 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 Nikkei 225 are associated (or correlated) with VanEck Crypto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Crypto has no effect on the direction of Xtrackers Nikkei i.e., Xtrackers Nikkei and VanEck Crypto go up and down completely randomly.

Pair Corralation between Xtrackers Nikkei and VanEck Crypto

Assuming the 90 days trading horizon Xtrackers Nikkei is expected to generate 10.47 times less return on investment than VanEck Crypto. But when comparing it to its historical volatility, Xtrackers Nikkei 225 is 4.38 times less risky than VanEck Crypto. It trades about 0.09 of its potential returns per unit of risk. VanEck Crypto and is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  657.00  in VanEck Crypto and on September 17, 2024 and sell it today you would earn a total of  544.00  from holding VanEck Crypto and or generate 82.8% return on investment over 90 days.

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

Xtrackers Nikkei 225  vs.  VanEck Crypto and

Xtrackers Nikkei 225

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers Nikkei 225 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward-looking indicators, Xtrackers Nikkei is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

VanEck Crypto

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Crypto and are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, VanEck Crypto reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xtrackers Nikkei and VanEck Crypto

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

The idea behind Xtrackers Nikkei 225 and VanEck Crypto and 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.