Correlation Between Xtrackers LevDAX and Heineken

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

By analyzing existing cross correlation between Xtrackers LevDAX and Heineken NV, you can compare the effects of market volatilities on Xtrackers LevDAX and Heineken 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 LevDAX with a short position of Heineken. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers LevDAX and Heineken.

Diversification Opportunities for Xtrackers LevDAX and Heineken

-0.41

Correlation Coefficient

Xtrackers LevDAX  Heineken

Very good diversification

The 3 months correlation between Xtrackers and Heineken is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers LevDAX and Heineken NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heineken NV and Xtrackers LevDAX 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 LevDAX are associated (or correlated) with Heineken. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heineken NV has no effect on the direction of Xtrackers LevDAX i.e., Xtrackers LevDAX and Heineken go up and down completely randomly.

Pair Corralation between Xtrackers LevDAX and Heineken

Assuming the 90 days trading horizon Xtrackers LevDAX is expected to generate 1.56 times more return on investment than Heineken. However, Xtrackers LevDAX is 1.56 times more volatile than Heineken NV. It trades about 0.14 of its potential returns per unit of risk. Heineken NV is currently generating about -0.22 per unit of risk. If you would invest  17,956  in Xtrackers LevDAX on September 13, 2024 and sell it today you would earn a total of  2,974  from holding Xtrackers LevDAX or generate 16.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Xtrackers LevDAX  vs.  Heineken NV

Xtrackers LevDAX

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers LevDAX are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Xtrackers LevDAX reported solid returns over the last few months and may actually be approaching a breakup point.

Heineken NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Heineken NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's forward-looking signals 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 company stockholders.

Pair Trading with Xtrackers LevDAX and Heineken

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

The idea behind Xtrackers LevDAX and Heineken NV 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.