Correlation Between Mnchener Rck and Xtrackers ShortDAX

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

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

Diversification Opportunities for Mnchener Rck and Xtrackers ShortDAX

-0.59

Correlation Coefficient

Mnchener Rck  Xtrackers ShortDAX

Excellent diversification

The 3 months correlation between Mnchener and Xtrackers is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Mnchener Rck AG and Xtrackers ShortDAX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers ShortDAX and Mnchener Rck 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 Mnchener Rck AG are associated (or correlated) with Xtrackers ShortDAX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers ShortDAX has no effect on the direction of Mnchener Rck i.e., Mnchener Rck and Xtrackers ShortDAX go up and down completely randomly.

Pair Corralation between Mnchener Rck and Xtrackers ShortDAX

Assuming the 90 days trading horizon Mnchener Rck AG is expected to generate 0.76 times more return on investment than Xtrackers ShortDAX. However, Mnchener Rck AG is 1.32 times less risky than Xtrackers ShortDAX. It trades about 0.05 of its potential returns per unit of risk. Xtrackers ShortDAX is currently generating about -0.15 per unit of risk. If you would invest  48,400  in Mnchener Rck AG on September 13, 2024 and sell it today you would earn a total of  1,620  from holding Mnchener Rck AG or generate 3.35% return on investment over 90 days.

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

Mnchener Rck AG  vs.  Xtrackers ShortDAX

Mnchener Rck AG

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mnchener Rck AG are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Mnchener Rck is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Xtrackers ShortDAX

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xtrackers ShortDAX has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Etf's basic 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 Exchange Traded Fund stockholders.

Pair Trading with Mnchener Rck and Xtrackers ShortDAX

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

The idea behind Mnchener Rck AG and Xtrackers ShortDAX 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.