Correlation Between Xtrackers USD and IShares Fallen

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

By analyzing existing cross correlation between Xtrackers USD High and iShares Fallen Angels, you can compare the effects of market volatilities on Xtrackers USD and IShares Fallen 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 USD with a short position of IShares Fallen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers USD and IShares Fallen.

Diversification Opportunities for Xtrackers USD and IShares Fallen

0.95

Correlation Coefficient

Xtrackers USD  IShares Fallen

Almost no diversification

The 3 months correlation between Xtrackers and IShares is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers USD High and iShares Fallen Angels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Fallen Angels and Xtrackers USD 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 USD High are associated (or correlated) with IShares Fallen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Fallen Angels has no effect on the direction of Xtrackers USD i.e., Xtrackers USD and IShares Fallen go up and down completely randomly.

Pair Corralation between Xtrackers USD and IShares Fallen

Given the investment horizon of 90 days Xtrackers USD High is expected to generate 0.85 times more return on investment than IShares Fallen. However, Xtrackers USD High is 1.18 times less risky than IShares Fallen. It trades about 0.16 of its potential returns per unit of risk. iShares Fallen Angels is currently generating about 0.12 per unit of risk. If you would invest  3,577  in Xtrackers USD High on September 3, 2024 and sell it today you would earn a total of  80.00  from holding Xtrackers USD High or generate 2.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Xtrackers USD High  vs.  iShares Fallen Angels

Xtrackers USD High

Risk-Adjusted Performance

12 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers USD High are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, Xtrackers USD is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

iShares Fallen Angels

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Fallen Angels are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, IShares Fallen is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Xtrackers USD and IShares Fallen

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

The idea behind Xtrackers USD High and iShares Fallen Angels 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.