Correlation Between Xtrackers Nikkei and HANetf ICAV

Can any of the company-specific risk be diversified away by investing in both Xtrackers Nikkei and HANetf ICAV 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 HANetf ICAV 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 HANetf ICAV , you can compare the effects of market volatilities on Xtrackers Nikkei and HANetf ICAV 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 HANetf ICAV. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers Nikkei and HANetf ICAV.

Diversification Opportunities for Xtrackers Nikkei and HANetf ICAV

0.53

Correlation Coefficient

Xtrackers Nikkei  HANetf ICAV

Very weak diversification

The 3 months correlation between Xtrackers and HANetf is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers Nikkei 225 and HANetf ICAV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HANetf 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 HANetf ICAV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HANetf ICAV has no effect on the direction of Xtrackers Nikkei i.e., Xtrackers Nikkei and HANetf ICAV go up and down completely randomly.

Pair Corralation between Xtrackers Nikkei and HANetf ICAV

Assuming the 90 days trading horizon Xtrackers Nikkei 225 is expected to under-perform the HANetf ICAV. But the etf apears to be less risky and, when comparing its historical volatility, Xtrackers Nikkei 225 is 2.02 times less risky than HANetf ICAV. The etf trades about -0.01 of its potential returns per unit of risk. The HANetf ICAV is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,338  in HANetf ICAV on September 26, 2024 and sell it today you would earn a total of  70.00  from holding HANetf ICAV or generate 5.23% 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.  HANetf ICAV

Xtrackers Nikkei 225

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Xtrackers Nikkei 225 has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

HANetf ICAV

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HANetf ICAV are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward-looking signals, HANetf ICAV reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xtrackers Nikkei and HANetf ICAV

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

The idea behind Xtrackers Nikkei 225 and HANetf 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.

Check out your portfolio center.

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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.