Correlation Between Db X and SPDR SP

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

By analyzing existing cross correlation between db x trackers MSCI and SPDR SP Materials, you can compare the effects of market volatilities on Db X and SPDR SP 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 Db X with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Db X and SPDR SP.

Diversification Opportunities for Db X and SPDR SP

-0.55

Correlation Coefficient

Db X  SPDR SP

Excellent diversification

The 3 months correlation between XWLD and SPDR is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding db x trackers MSCI and SPDR SP Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Materials and Db X 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 db x trackers MSCI are associated (or correlated) with SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP Materials has no effect on the direction of Db X i.e., Db X and SPDR SP go up and down completely randomly.

Pair Corralation between Db X and SPDR SP

Assuming the 90 days trading horizon db x trackers MSCI is expected to generate 0.7 times more return on investment than SPDR SP. However, db x trackers MSCI is 1.44 times less risky than SPDR SP. It trades about 0.12 of its potential returns per unit of risk. SPDR SP Materials is currently generating about 0.05 per unit of risk. If you would invest  716,000  in db x trackers MSCI on October 24, 2024 and sell it today you would earn a total of  266,450  from holding db x trackers MSCI or generate 37.21% return on investment over 90 days.

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

db x trackers MSCI  vs.  SPDR SP Materials

db x trackers

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in db x trackers MSCI are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Db X may actually be approaching a critical reversion point that can send shares even higher in February 2025.

SPDR SP Materials

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind db x trackers MSCI and SPDR SP Materials 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.