Correlation Between Xtrackers ShortDAX and Lenovo Group

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

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

Diversification Opportunities for Xtrackers ShortDAX and Lenovo Group

-0.34

Correlation Coefficient

Xtrackers ShortDAX  Lenovo Group

Very good diversification

The 3 months correlation between Xtrackers and Lenovo is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers ShortDAX and Lenovo Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lenovo Group Limited 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 Lenovo Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lenovo Group Limited has no effect on the direction of Xtrackers ShortDAX i.e., Xtrackers ShortDAX and Lenovo Group go up and down completely randomly.

Pair Corralation between Xtrackers ShortDAX and Lenovo Group

Assuming the 90 days trading horizon Xtrackers ShortDAX is expected to under-perform the Lenovo Group. But the etf apears to be less risky and, when comparing its historical volatility, Xtrackers ShortDAX is 1.77 times less risky than Lenovo Group. The etf trades about -0.15 of its potential returns per unit of risk. The Lenovo Group Limited is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,059  in Lenovo Group Limited on September 13, 2024 and sell it today you would earn a total of  221.00  from holding Lenovo Group Limited or generate 10.73% return on investment over 90 days.

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

Xtrackers ShortDAX  vs.  Lenovo Group Limited

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 fragile 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.

Lenovo Group Limited

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lenovo Group Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady essential indicators, Lenovo Group may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Xtrackers ShortDAX and Lenovo Group

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

The idea behind Xtrackers ShortDAX and Lenovo Group Limited 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.