Correlation Between Xtrackers ShortDAX and BGF Euro

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

By analyzing existing cross correlation between Xtrackers ShortDAX and BGF Euro Markets, you can compare the effects of market volatilities on Xtrackers ShortDAX and BGF Euro 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 BGF Euro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers ShortDAX and BGF Euro.

Diversification Opportunities for Xtrackers ShortDAX and BGF Euro

-0.76

Correlation Coefficient

Xtrackers ShortDAX  BGF Euro

Pay attention - limited upside

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

Pair Corralation between Xtrackers ShortDAX and BGF Euro

Assuming the 90 days trading horizon Xtrackers ShortDAX is expected to under-perform the BGF Euro. In addition to that, Xtrackers ShortDAX is 1.49 times more volatile than BGF Euro Markets. It trades about -0.07 of its total potential returns per unit of risk. BGF Euro Markets is currently generating about 0.03 per unit of volatility. If you would invest  4,275  in BGF Euro Markets on September 15, 2024 and sell it today you would earn a total of  258.00  from holding BGF Euro Markets or generate 6.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	41.98%
Values	Daily Returns

Xtrackers ShortDAX  vs.  BGF Euro Markets

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.

BGF Euro Markets

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BGF Euro Markets are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather sound technical and fundamental indicators, BGF Euro is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Xtrackers ShortDAX and BGF Euro

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

The idea behind Xtrackers ShortDAX and BGF Euro Markets 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.