Correlation Between Xtrackers and Xtrackers Nifty

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

Diversification Opportunities for Xtrackers and Xtrackers Nifty

0.51

Correlation Coefficient

Xtrackers  Xtrackers Nifty

Very weak diversification

The 3 months correlation between Xtrackers and Xtrackers is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers II Global and Xtrackers Nifty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers Nifty 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 Nifty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers Nifty has no effect on the direction of Xtrackers i.e., Xtrackers and Xtrackers Nifty go up and down completely randomly.

Pair Corralation between Xtrackers and Xtrackers Nifty

Assuming the 90 days trading horizon Xtrackers II Global is expected to under-perform the Xtrackers Nifty. But the etf apears to be less risky and, when comparing its historical volatility, Xtrackers II Global is 2.58 times less risky than Xtrackers Nifty. The etf trades about -0.14 of its potential returns per unit of risk. The Xtrackers Nifty is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  26,040  in Xtrackers Nifty on September 17, 2024 and sell it today you would earn a total of  640.00  from holding Xtrackers Nifty or generate 2.46% return on investment over 90 days.

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

Xtrackers II Global  vs.  Xtrackers Nifty

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 Nifty

Risk-Adjusted Performance

3 of 100

Insignificant

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

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

The idea behind Xtrackers II Global and Xtrackers Nifty 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.