Correlation Between Xtrackers ShortDAX and BGF Global

Can any of the company-specific risk be diversified away by investing in both Xtrackers ShortDAX and BGF Global 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 Global 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 Global Allocation, you can compare the effects of market volatilities on Xtrackers ShortDAX and BGF Global 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 Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers ShortDAX and BGF Global.

Diversification Opportunities for Xtrackers ShortDAX and BGF Global

-0.68

Correlation Coefficient

Xtrackers ShortDAX  BGF Global

Excellent diversification

The 3 months correlation between Xtrackers and BGF is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers ShortDAX and BGF Global Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BGF Global Allocation 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 Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BGF Global Allocation has no effect on the direction of Xtrackers ShortDAX i.e., Xtrackers ShortDAX and BGF Global go up and down completely randomly.

Pair Corralation between Xtrackers ShortDAX and BGF Global

Assuming the 90 days trading horizon Xtrackers ShortDAX is expected to under-perform the BGF Global. In addition to that, Xtrackers ShortDAX is 2.09 times more volatile than BGF Global Allocation. It trades about -0.16 of its total potential returns per unit of risk. BGF Global Allocation is currently generating about 0.17 per unit of volatility. If you would invest  7,106  in BGF Global Allocation on September 12, 2024 and sell it today you would earn a total of  569.00  from holding BGF Global Allocation or generate 8.01% 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.  BGF Global Allocation

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.

BGF Global Allocation

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BGF Global Allocation are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather weak technical and fundamental indicators, BGF Global may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Xtrackers ShortDAX and BGF Global

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

The idea behind Xtrackers ShortDAX and BGF Global Allocation 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.