Correlation Between Xtrackers and SPDR Barclays

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

By analyzing existing cross correlation between Xtrackers II and SPDR Barclays 10, you can compare the effects of market volatilities on Xtrackers and SPDR Barclays 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 SPDR Barclays. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers and SPDR Barclays.

Diversification Opportunities for Xtrackers and SPDR Barclays

0.42

Correlation Coefficient

Xtrackers  SPDR Barclays

Very weak diversification

The 3 months correlation between Xtrackers and SPDR is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers II and SPDR Barclays 10 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Barclays 10 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 SPDR Barclays. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Barclays 10 has no effect on the direction of Xtrackers i.e., Xtrackers and SPDR Barclays go up and down completely randomly.

Pair Corralation between Xtrackers and SPDR Barclays

Assuming the 90 days trading horizon Xtrackers II is expected to under-perform the SPDR Barclays. In addition to that, Xtrackers is 1.24 times more volatile than SPDR Barclays 10. It trades about -0.05 of its total potential returns per unit of risk. SPDR Barclays 10 is currently generating about 0.07 per unit of volatility. If you would invest  2,553  in SPDR Barclays 10 on September 12, 2024 and sell it today you would earn a total of  79.00  from holding SPDR Barclays 10 or generate 3.09% return on investment over 90 days.

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

Xtrackers II   vs.  SPDR Barclays 10

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.

SPDR Barclays 10

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Barclays 10 are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental drivers, SPDR Barclays is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Xtrackers and SPDR Barclays

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

The idea behind Xtrackers II and SPDR Barclays 10 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.