Correlation Between Xtrackers ShortDAX and ALM Offensif

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

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

Diversification Opportunities for Xtrackers ShortDAX and ALM Offensif

-0.76

Correlation Coefficient

Xtrackers ShortDAX  ALM Offensif

Pay attention - limited upside

The 3 months correlation between Xtrackers and ALM is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers ShortDAX and ALM Offensif in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALM Offensif and Xtrackers ShortDAX 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 ShortDAX are associated (or correlated) with ALM Offensif. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALM Offensif has no effect on the direction of Xtrackers ShortDAX i.e., Xtrackers ShortDAX and ALM Offensif go up and down completely randomly.

Pair Corralation between Xtrackers ShortDAX and ALM Offensif

Assuming the 90 days trading horizon Xtrackers ShortDAX is expected to under-perform the ALM Offensif. In addition to that, Xtrackers ShortDAX is 3.38 times more volatile than ALM Offensif. It trades about -0.18 of its total potential returns per unit of risk. ALM Offensif is currently generating about 0.22 per unit of volatility. If you would invest  30,320  in ALM Offensif on September 11, 2024 and sell it today you would earn a total of  1,951  from holding ALM Offensif or generate 6.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.88%
Values	Daily Returns

Xtrackers ShortDAX  vs.  ALM Offensif

Xtrackers ShortDAX

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xtrackers ShortDAX has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Etf's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the Exchange Traded Fund stockholders.

ALM Offensif

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ALM Offensif are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat unfluctuating basic indicators, ALM Offensif may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Xtrackers ShortDAX and ALM Offensif

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

The idea behind Xtrackers ShortDAX and ALM Offensif 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.