Correlation Between Xtrackers and IShares Govt

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

By analyzing existing cross correlation between Xtrackers II and iShares Govt Bond, you can compare the effects of market volatilities on Xtrackers and IShares Govt 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 IShares Govt. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers and IShares Govt.

Diversification Opportunities for Xtrackers and IShares Govt

0.41

Correlation Coefficient

Xtrackers  IShares Govt

Very weak diversification

The 3 months correlation between Xtrackers and IShares is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers II and iShares Govt Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Govt Bond 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 are associated (or correlated) with IShares Govt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Govt Bond has no effect on the direction of Xtrackers i.e., Xtrackers and IShares Govt go up and down completely randomly.

Pair Corralation between Xtrackers and IShares Govt

Assuming the 90 days trading horizon Xtrackers II is expected to under-perform the IShares Govt. In addition to that, Xtrackers is 2.09 times more volatile than iShares Govt Bond. It trades about -0.07 of its total potential returns per unit of risk. iShares Govt Bond is currently generating about 0.09 per unit of volatility. If you would invest  15,444  in iShares Govt Bond on September 13, 2024 and sell it today you would earn a total of  334.00  from holding iShares Govt Bond or generate 2.16% return on investment over 90 days.

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

Xtrackers II   vs.  iShares Govt Bond

Xtrackers II

Risk-Adjusted Performance

0 of 100

Very Weak

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

iShares Govt Bond

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Govt Bond are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, IShares Govt is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Xtrackers and IShares Govt

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

The idea behind Xtrackers II and iShares Govt Bond 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.