Correlation Between Xtrackers Nikkei and Ossiam Irl

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

By analyzing existing cross correlation between Xtrackers Nikkei 225 and Ossiam Irl Icav, you can compare the effects of market volatilities on Xtrackers Nikkei and Ossiam Irl 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 Nikkei with a short position of Ossiam Irl. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers Nikkei and Ossiam Irl.

Diversification Opportunities for Xtrackers Nikkei and Ossiam Irl

0.42

Correlation Coefficient

Xtrackers Nikkei  Ossiam Irl

Very weak diversification

The 3 months correlation between Xtrackers and Ossiam is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers Nikkei 225 and Ossiam Irl Icav in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ossiam Irl Icav and Xtrackers Nikkei 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 Nikkei 225 are associated (or correlated) with Ossiam Irl. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ossiam Irl Icav has no effect on the direction of Xtrackers Nikkei i.e., Xtrackers Nikkei and Ossiam Irl go up and down completely randomly.

Pair Corralation between Xtrackers Nikkei and Ossiam Irl

Assuming the 90 days trading horizon Xtrackers Nikkei is expected to generate 5.51 times less return on investment than Ossiam Irl. In addition to that, Xtrackers Nikkei is 1.3 times more volatile than Ossiam Irl Icav. It trades about 0.03 of its total potential returns per unit of risk. Ossiam Irl Icav is currently generating about 0.21 per unit of volatility. If you would invest  18,464  in Ossiam Irl Icav on September 25, 2024 and sell it today you would earn a total of  2,211  from holding Ossiam Irl Icav or generate 11.97% return on investment over 90 days.

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

Xtrackers Nikkei 225  vs.  Ossiam Irl Icav

Xtrackers Nikkei 225

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers Nikkei 225 are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward-looking indicators, Xtrackers Nikkei is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Ossiam Irl Icav

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ossiam Irl Icav are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Ossiam Irl may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Xtrackers Nikkei and Ossiam Irl

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

The idea behind Xtrackers Nikkei 225 and Ossiam Irl Icav 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.