Correlation Between Münchener Rück and Xtrackers LevDAX

Can any of the company-specific risk be diversified away by investing in both Münchener Rück and Xtrackers LevDAX 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 Münchener Rück and Xtrackers LevDAX 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 LevDAX, you can compare the effects of market volatilities on Münchener Rück and Xtrackers LevDAX 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 Münchener Rück with a short position of Xtrackers LevDAX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Münchener Rück and Xtrackers LevDAX.

Diversification Opportunities for Münchener Rück and Xtrackers LevDAX

0.23

Correlation Coefficient

Münchener Rück  Xtrackers LevDAX

Modest diversification

The 3 months correlation between Münchener and Xtrackers is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Mnchener Rck AG and Xtrackers LevDAX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers LevDAX and Münchener Rück 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 LevDAX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers LevDAX has no effect on the direction of Münchener Rück i.e., Münchener Rück and Xtrackers LevDAX go up and down completely randomly.

Pair Corralation between Münchener Rück and Xtrackers LevDAX

Assuming the 90 days trading horizon Mnchener Rck AG is expected to generate 0.45 times more return on investment than Xtrackers LevDAX. However, Mnchener Rck AG is 2.23 times less risky than Xtrackers LevDAX. It trades about 0.33 of its potential returns per unit of risk. Xtrackers LevDAX is currently generating about 0.15 per unit of risk. If you would invest  46,920  in Mnchener Rck AG on September 5, 2024 and sell it today you would earn a total of  3,840  from holding Mnchener Rck AG or generate 8.18% return on investment over 90 days.

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

Mnchener Rck AG  vs.  Xtrackers LevDAX

Mnchener Rck AG

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mnchener Rck AG are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Münchener Rück is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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.

Pair Trading with Münchener Rück and Xtrackers LevDAX

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

The idea behind Mnchener Rck AG and Xtrackers LevDAX 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 Stocks Directory module to find actively traded stocks across global markets.