Correlation Between Xtrackers ShortDAX and CNOOC

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

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

Diversification Opportunities for Xtrackers ShortDAX and CNOOC

-0.73

Correlation Coefficient

Xtrackers ShortDAX  CNOOC

Pay attention - limited upside

The 3 months correlation between Xtrackers and CNOOC is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers ShortDAX and CNOOC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNOOC 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 CNOOC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CNOOC has no effect on the direction of Xtrackers ShortDAX i.e., Xtrackers ShortDAX and CNOOC go up and down completely randomly.

Pair Corralation between Xtrackers ShortDAX and CNOOC

Assuming the 90 days trading horizon Xtrackers ShortDAX is expected to under-perform the CNOOC. But the etf apears to be less risky and, when comparing its historical volatility, Xtrackers ShortDAX is 3.79 times less risky than CNOOC. The etf trades about -0.07 of its potential returns per unit of risk. The CNOOC is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  160.00  in CNOOC on September 3, 2024 and sell it today you would earn a total of  58.00  from holding CNOOC or generate 36.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Xtrackers ShortDAX  vs.  CNOOC

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.

CNOOC

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CNOOC are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CNOOC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xtrackers ShortDAX and CNOOC

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

The idea behind Xtrackers ShortDAX and CNOOC 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.