Correlation Between Xtrackers USD and Xtrackers FTSE

Can any of the company-specific risk be diversified away by investing in both Xtrackers USD and Xtrackers FTSE 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 Xtrackers FTSE 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 Xtrackers FTSE 250, you can compare the effects of market volatilities on Xtrackers USD and Xtrackers FTSE 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 Xtrackers FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers USD and Xtrackers FTSE.

Diversification Opportunities for Xtrackers USD and Xtrackers FTSE

0.66

Correlation Coefficient

Xtrackers USD  Xtrackers FTSE

Poor diversification

The 3 months correlation between Xtrackers and Xtrackers is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers USD Corporate and Xtrackers FTSE 250 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers FTSE 250 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 Xtrackers FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers FTSE 250 has no effect on the direction of Xtrackers USD i.e., Xtrackers USD and Xtrackers FTSE go up and down completely randomly.

Pair Corralation between Xtrackers USD and Xtrackers FTSE

Assuming the 90 days trading horizon Xtrackers USD Corporate is expected to generate 0.42 times more return on investment than Xtrackers FTSE. However, Xtrackers USD Corporate is 2.38 times less risky than Xtrackers FTSE. It trades about -0.38 of its potential returns per unit of risk. Xtrackers FTSE 250 is currently generating about -0.18 per unit of risk. If you would invest  2,007  in Xtrackers USD Corporate on October 9, 2024 and sell it today you would lose (33.00) from holding Xtrackers USD Corporate or give up 1.64% of portfolio value over 90 days.

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

Xtrackers USD Corporate  vs.  Xtrackers FTSE 250

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 comparatively stable basic indicators, Xtrackers USD is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Xtrackers FTSE 250

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xtrackers FTSE 250 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Xtrackers FTSE is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Xtrackers USD and Xtrackers FTSE

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

The idea behind Xtrackers USD Corporate and Xtrackers FTSE 250 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.