Correlation Between Xtrackers LevDAX and BANDAI NAMCO

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

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

Diversification Opportunities for Xtrackers LevDAX and BANDAI NAMCO

0.73

Correlation Coefficient

Xtrackers LevDAX  BANDAI NAMCO

Poor diversification

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

Pair Corralation between Xtrackers LevDAX and BANDAI NAMCO

Assuming the 90 days trading horizon Xtrackers LevDAX is expected to generate 1.14 times more return on investment than BANDAI NAMCO. However, Xtrackers LevDAX is 1.14 times more volatile than BANDAI NAMCO Holdings. It trades about 0.15 of its potential returns per unit of risk. BANDAI NAMCO Holdings is currently generating about 0.11 per unit of risk. If you would invest  18,668  in Xtrackers LevDAX on September 5, 2024 and sell it today you would earn a total of  1,422  from holding Xtrackers LevDAX or generate 7.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

Xtrackers LevDAX  vs.  BANDAI NAMCO Holdings

Xtrackers LevDAX

Risk-Adjusted Performance

8 of 100

OK

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

BANDAI NAMCO Holdings

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BANDAI NAMCO Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, BANDAI NAMCO reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xtrackers LevDAX and BANDAI NAMCO

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

The idea behind Xtrackers LevDAX and BANDAI NAMCO Holdings 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.