Correlation Between Xtrackers and VanEck Vectors

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

By analyzing existing cross correlation between Xtrackers II and VanEck Vectors UCITS, you can compare the effects of market volatilities on Xtrackers and VanEck Vectors 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 VanEck Vectors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers and VanEck Vectors.

Diversification Opportunities for Xtrackers and VanEck Vectors

-0.4

Correlation Coefficient

Xtrackers  VanEck Vectors

Very good 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 II and VanEck Vectors UCITS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Vectors UCITS 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 VanEck Vectors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Vectors UCITS has no effect on the direction of Xtrackers i.e., Xtrackers and VanEck Vectors go up and down completely randomly.

Pair Corralation between Xtrackers and VanEck Vectors

Assuming the 90 days trading horizon Xtrackers II is expected to generate 52.44 times more return on investment than VanEck Vectors. However, Xtrackers is 52.44 times more volatile than VanEck Vectors UCITS. It trades about 0.04 of its potential returns per unit of risk. VanEck Vectors UCITS is currently generating about 0.08 per unit of risk. If you would invest  909.00  in Xtrackers II on September 18, 2024 and sell it today you would lose (142.00) from holding Xtrackers II or give up 15.62% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Xtrackers II   vs.  VanEck Vectors UCITS

Xtrackers II

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xtrackers II has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Xtrackers is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

VanEck Vectors UCITS

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Vectors UCITS are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, VanEck Vectors may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Xtrackers and VanEck Vectors

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

The idea behind Xtrackers II and VanEck Vectors UCITS 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.