Correlation Between Xtrackers and IShares Core

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

Diversification Opportunities for Xtrackers and IShares Core

-0.33

Correlation Coefficient

Xtrackers  IShares Core

Very good diversification

The 3 months correlation between Xtrackers and IShares is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers II and iShares Core MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core 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 are associated (or correlated) with IShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core MSCI has no effect on the direction of Xtrackers i.e., Xtrackers and IShares Core go up and down completely randomly.

Pair Corralation between Xtrackers and IShares Core

Assuming the 90 days trading horizon Xtrackers II is expected to under-perform the IShares Core. But the etf apears to be less risky and, when comparing its historical volatility, Xtrackers II is 1.2 times less risky than IShares Core. The etf trades about -0.07 of its potential returns per unit of risk. The iShares Core MSCI is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  431.00  in iShares Core MSCI on September 17, 2024 and sell it today you would earn a total of  31.00  from holding iShares Core MSCI or generate 7.19% return on investment over 90 days.

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

Xtrackers II   vs.  iShares Core MSCI

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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

iShares Core MSCI

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core MSCI are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, IShares Core may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Xtrackers and IShares Core

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

The idea behind Xtrackers II and iShares Core 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.