Correlation Between Xtrackers MSCI and Touchstone Dynamic
Can any of the company-specific risk be diversified away by investing in both Xtrackers MSCI and Touchstone Dynamic 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 MSCI and Touchstone Dynamic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Xtrackers MSCI EAFE and Touchstone Dynamic International, you can compare the effects of market volatilities on Xtrackers MSCI and Touchstone Dynamic 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 MSCI with a short position of Touchstone Dynamic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers MSCI and Touchstone Dynamic.
Diversification Opportunities for Xtrackers MSCI and Touchstone Dynamic
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Xtrackers and Touchstone is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers MSCI EAFE and Touchstone Dynamic Internation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Touchstone Dynamic and Xtrackers MSCI 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 MSCI EAFE are associated (or correlated) with Touchstone Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Touchstone Dynamic has no effect on the direction of Xtrackers MSCI i.e., Xtrackers MSCI and Touchstone Dynamic go up and down completely randomly.
Pair Corralation between Xtrackers MSCI and Touchstone Dynamic
Given the investment horizon of 90 days Xtrackers MSCI EAFE is expected to generate 0.93 times more return on investment than Touchstone Dynamic. However, Xtrackers MSCI EAFE is 1.08 times less risky than Touchstone Dynamic. It trades about -0.05 of its potential returns per unit of risk. Touchstone Dynamic International is currently generating about -0.35 per unit of risk. If you would invest 4,221 in Xtrackers MSCI EAFE on October 10, 2024 and sell it today you would lose (29.00) from holding Xtrackers MSCI EAFE or give up 0.69% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Xtrackers MSCI EAFE vs. Touchstone Dynamic Internation
Performance |
| Timeline |
| Xtrackers MSCI EAFE |
| Touchstone Dynamic |
Xtrackers MSCI and Touchstone Dynamic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Xtrackers MSCI and Touchstone Dynamic
The main advantage of trading using opposite Xtrackers MSCI and Touchstone Dynamic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers MSCI position performs unexpectedly, Touchstone Dynamic 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 Touchstone Dynamic will offset losses from the drop in Touchstone Dynamic's long position.| Xtrackers MSCI vs. Xtrackers MSCI Europe | Xtrackers MSCI vs. Xtrackers MSCI Japan | Xtrackers MSCI vs. iShares Currency Hedged | Xtrackers MSCI vs. WisdomTree Europe Hedged |
| Touchstone Dynamic vs. JPMorgan Fundamental Data | Touchstone Dynamic vs. Matthews China Discovery | Touchstone Dynamic vs. Davis Select International | Touchstone Dynamic vs. Dimensional ETF Trust |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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