Correlation Between Xtrackers LevDAX and Maschinenfabrik Berthold

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

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

Diversification Opportunities for Xtrackers LevDAX and Maschinenfabrik Berthold

-0.31

Correlation Coefficient

Xtrackers LevDAX  Maschinenfabrik Berthold

Very good diversification

The 3 months correlation between Xtrackers and Maschinenfabrik is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers LevDAX and Maschinenfabrik Berthold Herml in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maschinenfabrik Berthold 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 Maschinenfabrik Berthold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maschinenfabrik Berthold has no effect on the direction of Xtrackers LevDAX i.e., Xtrackers LevDAX and Maschinenfabrik Berthold go up and down completely randomly.

Pair Corralation between Xtrackers LevDAX and Maschinenfabrik Berthold

Assuming the 90 days trading horizon Xtrackers LevDAX is expected to generate 1.06 times more return on investment than Maschinenfabrik Berthold. However, Xtrackers LevDAX is 1.06 times more volatile than Maschinenfabrik Berthold Hermle. It trades about 0.15 of its potential returns per unit of risk. Maschinenfabrik Berthold Hermle is currently generating about -0.17 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  3,134  from holding Xtrackers LevDAX or generate 17.45% return on investment over 90 days.

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

Xtrackers LevDAX  vs.  Maschinenfabrik Berthold Herml

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.

Maschinenfabrik Berthold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Maschinenfabrik Berthold Hermle has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical 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 company stockholders.

Pair Trading with Xtrackers LevDAX and Maschinenfabrik Berthold

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

The idea behind Xtrackers LevDAX and Maschinenfabrik Berthold Hermle 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.