Correlation Between Xtrackers California and VSDM
Can any of the company-specific risk be diversified away by investing in both Xtrackers California and VSDM 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 California and VSDM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Xtrackers California Municipal and VSDM, you can compare the effects of market volatilities on Xtrackers California and VSDM 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 California with a short position of VSDM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers California and VSDM.
Diversification Opportunities for Xtrackers California and VSDM
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Xtrackers and VSDM is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers California Municipal and VSDM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VSDM and Xtrackers California 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 California Municipal are associated (or correlated) with VSDM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VSDM has no effect on the direction of Xtrackers California i.e., Xtrackers California and VSDM go up and down completely randomly.
Pair Corralation between Xtrackers California and VSDM
Allowing for the 90-day total investment horizon Xtrackers California is expected to generate 2.96 times less return on investment than VSDM. In addition to that, Xtrackers California is 2.57 times more volatile than VSDM. It trades about 0.01 of its total potential returns per unit of risk. VSDM is currently generating about 0.06 per unit of volatility. If you would invest 7,486 in VSDM on October 20, 2024 and sell it today you would earn a total of 11.00 from holding VSDM or generate 0.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Xtrackers California Municipal vs. VSDM
Performance |
| Timeline |
| Xtrackers California |
| VSDM |
Xtrackers California and VSDM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Xtrackers California and VSDM
The main advantage of trading using opposite Xtrackers California and VSDM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers California position performs unexpectedly, VSDM 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 VSDM will offset losses from the drop in VSDM's long position.| Xtrackers California vs. VCRM | Xtrackers California vs. IQ MacKay Municipal | Xtrackers California vs. IQ MacKay Municipal | Xtrackers California vs. ALPS Intermediate Municipal |
| VSDM vs. Xtrackers California Municipal | VSDM vs. VCRM | VSDM vs. IQ MacKay Municipal | VSDM vs. IQ MacKay Municipal |
Check out your portfolio center.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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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