Correlation Between Xtrackers and Xtrackers MSCI

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

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

Diversification Opportunities for Xtrackers and Xtrackers MSCI

-0.67

Correlation Coefficient

Xtrackers  Xtrackers MSCI

Excellent diversification

The 3 months correlation between Xtrackers and Xtrackers is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers II Global and Xtrackers MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers MSCI 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 II Global 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 has no effect on the direction of Xtrackers i.e., Xtrackers and Xtrackers MSCI go up and down completely randomly.

Pair Corralation between Xtrackers and Xtrackers MSCI

Assuming the 90 days trading horizon Xtrackers II Global is expected to under-perform the Xtrackers MSCI. But the etf apears to be less risky and, when comparing its historical volatility, Xtrackers II Global is 2.39 times less risky than Xtrackers MSCI. The etf trades about -0.14 of its potential returns per unit of risk. The Xtrackers MSCI is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  3,249  in Xtrackers MSCI on September 26, 2024 and sell it today you would earn a total of  61.00  from holding Xtrackers MSCI or generate 1.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	89.06%
Values	Daily Returns

Xtrackers II Global  vs.  Xtrackers MSCI

Xtrackers II Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xtrackers II Global has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Xtrackers is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Xtrackers MSCI

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers MSCI are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic 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 Xtrackers and Xtrackers MSCI

The main advantage of trading using opposite Xtrackers and Xtrackers MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers 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 Xtrackers II Global and Xtrackers MSCI 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.