Correlation Between Xtrackers and IShares Trust

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

By analyzing existing cross correlation between Xtrackers 0 1 Year and iShares Trust, you can compare the effects of market volatilities on Xtrackers and IShares Trust 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 with a short position of IShares Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers and IShares Trust.

Diversification Opportunities for Xtrackers and IShares Trust

-0.4

Correlation Coefficient

Xtrackers  IShares Trust

Very good diversification

The 3 months correlation between Xtrackers and IShares is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers 0 1 Year and iShares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Trust and Xtrackers 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 0 1 Year are associated (or correlated) with IShares Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Trust has no effect on the direction of Xtrackers i.e., Xtrackers and IShares Trust go up and down completely randomly.

Pair Corralation between Xtrackers and IShares Trust

Given the investment horizon of 90 days Xtrackers is expected to generate 6.51 times less return on investment than IShares Trust. But when comparing it to its historical volatility, Xtrackers 0 1 Year is 32.5 times less risky than IShares Trust. It trades about 0.78 of its potential returns per unit of risk. iShares Trust is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  3,085  in iShares Trust on September 2, 2024 and sell it today you would earn a total of  204.00  from holding iShares Trust or generate 6.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	59.38%
Values	Daily Returns

Xtrackers 0 1 Year  vs.  iShares Trust

Xtrackers 0 1

Risk-Adjusted Performance

61 of 100

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers 0 1 Year are ranked lower than 61 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Xtrackers is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

iShares Trust

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Trust are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental indicators, IShares Trust may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Xtrackers and IShares Trust

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

The idea behind Xtrackers 0 1 Year and iShares Trust 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.