Correlation Between Xtrackers ShortDAX and Münchener Rück

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

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

Diversification Opportunities for Xtrackers ShortDAX and Münchener Rück

-0.26

Correlation Coefficient

Xtrackers ShortDAX  Münchener Rück

Very good diversification

The 3 months correlation between Xtrackers and Münchener is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers ShortDAX and Mnchener Rck AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mnchener Rck AG 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 Münchener Rück. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mnchener Rck AG has no effect on the direction of Xtrackers ShortDAX i.e., Xtrackers ShortDAX and Münchener Rück go up and down completely randomly.

Pair Corralation between Xtrackers ShortDAX and Münchener Rück

Assuming the 90 days trading horizon Xtrackers ShortDAX is expected to under-perform the Münchener Rück. In addition to that, Xtrackers ShortDAX is 1.31 times more volatile than Mnchener Rck AG. It trades about -0.1 of its total potential returns per unit of risk. Mnchener Rck AG is currently generating about 0.04 per unit of volatility. If you would invest  49,540  in Mnchener Rck AG on September 5, 2024 and sell it today you would earn a total of  1,220  from holding Mnchener Rck AG or generate 2.46% 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.  Mnchener Rck AG

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 latest unsteady performance, the Etf's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the Exchange Traded Fund stockholders.

Mnchener Rck AG

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mnchener Rck AG are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Münchener Rück is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Xtrackers ShortDAX and Münchener Rück

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

The idea behind Xtrackers ShortDAX and Mnchener Rck AG 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.