Correlation Between Xtrackers MSCI and HANetf ICAV

Can any of the company-specific risk be diversified away by investing in both Xtrackers MSCI and HANetf ICAV 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 HANetf ICAV 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 HANetf ICAV , you can compare the effects of market volatilities on Xtrackers MSCI and HANetf ICAV 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 HANetf ICAV. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers MSCI and HANetf ICAV.

Diversification Opportunities for Xtrackers MSCI and HANetf ICAV

0.67

Correlation Coefficient

Xtrackers MSCI  HANetf ICAV

Poor diversification

The 3 months correlation between Xtrackers and HANetf is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers MSCI World and HANetf ICAV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HANetf ICAV 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 HANetf ICAV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HANetf ICAV has no effect on the direction of Xtrackers MSCI i.e., Xtrackers MSCI and HANetf ICAV go up and down completely randomly.

Pair Corralation between Xtrackers MSCI and HANetf ICAV

Assuming the 90 days trading horizon Xtrackers MSCI World is expected to generate 0.94 times more return on investment than HANetf ICAV. However, Xtrackers MSCI World is 1.06 times less risky than HANetf ICAV. It trades about 0.15 of its potential returns per unit of risk. HANetf ICAV is currently generating about -0.21 per unit of risk. If you would invest  8,617  in Xtrackers MSCI World on September 26, 2024 and sell it today you would earn a total of  734.00  from holding Xtrackers MSCI World or generate 8.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	45.24%
Values	Daily Returns

Xtrackers MSCI World  vs.  HANetf ICAV

Xtrackers MSCI World

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers MSCI World are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Xtrackers MSCI reported solid returns over the last few months and may actually be approaching a breakup point.

HANetf ICAV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HANetf ICAV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, HANetf ICAV is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Xtrackers MSCI and HANetf ICAV

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

The idea behind Xtrackers MSCI World and HANetf ICAV 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.