Correlation Between Xtrackers High and Nuveen ESG

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

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

Diversification Opportunities for Xtrackers High and Nuveen ESG

0.77

Correlation Coefficient

Xtrackers High  Nuveen ESG

Poor diversification

The 3 months correlation between Xtrackers and Nuveen is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers High Beta and Nuveen ESG High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen ESG High and Xtrackers High 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 High Beta are associated (or correlated) with Nuveen ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen ESG High has no effect on the direction of Xtrackers High i.e., Xtrackers High and Nuveen ESG go up and down completely randomly.

Pair Corralation between Xtrackers High and Nuveen ESG

Given the investment horizon of 90 days Xtrackers High Beta is expected to generate 1.02 times more return on investment than Nuveen ESG. However, Xtrackers High is 1.02 times more volatile than Nuveen ESG High. It trades about 0.25 of its potential returns per unit of risk. Nuveen ESG High is currently generating about 0.13 per unit of risk. If you would invest  4,113  in Xtrackers High Beta on September 12, 2024 and sell it today you would earn a total of  131.23  from holding Xtrackers High Beta or generate 3.19% return on investment over 90 days.

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

Xtrackers High Beta  vs.  Nuveen ESG High

Xtrackers High Beta

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers High Beta are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Xtrackers High is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Nuveen ESG High

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nuveen ESG High are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical indicators, Nuveen ESG is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Xtrackers High and Nuveen ESG

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

The idea behind Xtrackers High Beta and Nuveen ESG High 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.

Check out your portfolio center.

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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.