Correlation Between Xtrackers and LG DAX
Can any of the company-specific risk be diversified away by investing in both Xtrackers and LG DAX 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 and LG DAX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Xtrackers II and LG DAX Daily, you can compare the effects of market volatilities on Xtrackers and LG DAX 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 with a short position of LG DAX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers and LG DAX.
Diversification Opportunities for Xtrackers and LG DAX
Average diversification
The 3 months correlation between Xtrackers and DES2 is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers II and LG DAX Daily in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG DAX Daily and Xtrackers 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 II are associated (or correlated) with LG DAX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG DAX Daily has no effect on the direction of Xtrackers i.e., Xtrackers and LG DAX go up and down completely randomly.
Pair Corralation between Xtrackers and LG DAX
Assuming the 90 days trading horizon Xtrackers II is expected to generate 0.33 times more return on investment than LG DAX. However, Xtrackers II is 3.06 times less risky than LG DAX. It trades about -0.05 of its potential returns per unit of risk. LG DAX Daily is currently generating about -0.16 per unit of risk. If you would invest 752.00 in Xtrackers II on December 28, 2024 and sell it today you would lose (19.00) from holding Xtrackers II or give up 2.53% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 98.41% |
Values | Daily Returns |
Xtrackers II vs. LG DAX Daily
Performance |
Timeline |
Xtrackers II |
LG DAX Daily |
Xtrackers and LG DAX Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Xtrackers and LG DAX
The main advantage of trading using opposite Xtrackers and LG DAX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers position performs unexpectedly, LG DAX 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 LG DAX will offset losses from the drop in LG DAX's long position.Xtrackers vs. Xtrackers II Global | Xtrackers vs. Xtrackers FTSE | Xtrackers vs. Xtrackers SP 500 | Xtrackers vs. Xtrackers MSCI |
LG DAX vs. LG DAX Daily | LG DAX vs. iShares Govt Bond | LG DAX vs. Amundi MSCI Europe | LG DAX vs. iShares Global AAA AA |
Check out your portfolio center.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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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