Correlation Between WBI Power and Xtrackers MSCI

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

By analyzing existing cross correlation between WBI Power Factor and Xtrackers MSCI EAFE, you can compare the effects of market volatilities on WBI Power and Xtrackers MSCI 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 WBI Power with a short position of Xtrackers MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of WBI Power and Xtrackers MSCI.

Diversification Opportunities for WBI Power and Xtrackers MSCI

-0.57

Correlation Coefficient

WBI Power  Xtrackers MSCI

Excellent diversification

The 3 months correlation between WBI and Xtrackers is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding WBI Power Factor and Xtrackers MSCI EAFE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers MSCI EAFE and WBI Power 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 WBI Power Factor are associated (or correlated) with Xtrackers MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers MSCI EAFE has no effect on the direction of WBI Power i.e., WBI Power and Xtrackers MSCI go up and down completely randomly.

Pair Corralation between WBI Power and Xtrackers MSCI

Given the investment horizon of 90 days WBI Power Factor is expected to generate 1.12 times more return on investment than Xtrackers MSCI. However, WBI Power is 1.12 times more volatile than Xtrackers MSCI EAFE. It trades about 0.04 of its potential returns per unit of risk. Xtrackers MSCI EAFE is currently generating about -0.13 per unit of risk. If you would invest  3,065  in WBI Power Factor on September 14, 2024 and sell it today you would earn a total of  57.72  from holding WBI Power Factor or generate 1.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

WBI Power Factor  vs.  Xtrackers MSCI EAFE

WBI Power Factor

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in WBI Power Factor are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong forward indicators, WBI Power is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Xtrackers MSCI EAFE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xtrackers MSCI EAFE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Xtrackers MSCI is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with WBI Power and Xtrackers MSCI

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

The idea behind WBI Power Factor and Xtrackers MSCI EAFE 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.