Correlation Between Xtrackers and IncomeShares Nasdaq

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

By analyzing existing cross correlation between Xtrackers II and IncomeShares Nasdaq 100, you can compare the effects of market volatilities on Xtrackers and IncomeShares Nasdaq 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 IncomeShares Nasdaq. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers and IncomeShares Nasdaq.

Diversification Opportunities for Xtrackers and IncomeShares Nasdaq

-0.23

Correlation Coefficient

Xtrackers  IncomeShares Nasdaq

Very good diversification

The 3 months correlation between Xtrackers and IncomeShares is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers II and IncomeShares Nasdaq 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IncomeShares Nasdaq 100 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 IncomeShares Nasdaq. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IncomeShares Nasdaq 100 has no effect on the direction of Xtrackers i.e., Xtrackers and IncomeShares Nasdaq go up and down completely randomly.

Pair Corralation between Xtrackers and IncomeShares Nasdaq

Assuming the 90 days trading horizon Xtrackers II is expected to generate 1.16 times more return on investment than IncomeShares Nasdaq. However, Xtrackers is 1.16 times more volatile than IncomeShares Nasdaq 100. It trades about 0.02 of its potential returns per unit of risk. IncomeShares Nasdaq 100 is currently generating about -0.1 per unit of risk. If you would invest  751.00  in Xtrackers II on September 28, 2024 and sell it today you would earn a total of  3.00  from holding Xtrackers II or generate 0.4% 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.  IncomeShares Nasdaq 100

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.

IncomeShares Nasdaq 100

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IncomeShares Nasdaq 100 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, IncomeShares Nasdaq is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Xtrackers and IncomeShares Nasdaq

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

The idea behind Xtrackers II and IncomeShares Nasdaq 100 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.