Correlation Between Xtrackers Russell and Xtrackers

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

By analyzing existing cross correlation between Xtrackers Russell 2000 and Xtrackers SP 500, you can compare the effects of market volatilities on Xtrackers Russell and Xtrackers 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 Russell with a short position of Xtrackers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers Russell and Xtrackers.

Diversification Opportunities for Xtrackers Russell and Xtrackers

0.87

Correlation Coefficient

Xtrackers Russell  Xtrackers

Very poor diversification

The 3 months correlation between Xtrackers and Xtrackers is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers Russell 2000 and Xtrackers SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers SP 500 and Xtrackers Russell 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 Russell 2000 are associated (or correlated) with Xtrackers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers SP 500 has no effect on the direction of Xtrackers Russell i.e., Xtrackers Russell and Xtrackers go up and down completely randomly.

Pair Corralation between Xtrackers Russell and Xtrackers

Assuming the 90 days trading horizon Xtrackers Russell 2000 is expected to under-perform the Xtrackers. In addition to that, Xtrackers Russell is 1.18 times more volatile than Xtrackers SP 500. It trades about -0.12 of its total potential returns per unit of risk. Xtrackers SP 500 is currently generating about -0.04 per unit of volatility. If you would invest  1,089  in Xtrackers SP 500 on December 26, 2024 and sell it today you would lose (33.00) from holding Xtrackers SP 500 or give up 3.03% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.41%
Values	Daily Returns

Xtrackers Russell 2000  vs.  Xtrackers SP 500

Xtrackers Russell 2000

Risk-Adjusted Performance

Very Weak

Over the last 90 days Xtrackers Russell 2000 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Etf's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

Xtrackers SP 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days Xtrackers SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Xtrackers 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 Russell and Xtrackers

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

The idea behind Xtrackers Russell 2000 and Xtrackers SP 500 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.