Correlation Between Xtrackers MSCI and SPDR STOXX
Can any of the company-specific risk be diversified away by investing in both Xtrackers MSCI and SPDR STOXX 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 SPDR STOXX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Xtrackers MSCI Europe and SPDR STOXX Europe, you can compare the effects of market volatilities on Xtrackers MSCI and SPDR STOXX 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 SPDR STOXX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers MSCI and SPDR STOXX.
Diversification Opportunities for Xtrackers MSCI and SPDR STOXX
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Xtrackers and SPDR is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers MSCI Europe and SPDR STOXX Europe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR STOXX Europe 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 Europe are associated (or correlated) with SPDR STOXX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR STOXX Europe has no effect on the direction of Xtrackers MSCI i.e., Xtrackers MSCI and SPDR STOXX go up and down completely randomly.
Pair Corralation between Xtrackers MSCI and SPDR STOXX
Given the investment horizon of 90 days Xtrackers MSCI Europe is expected to generate 0.8 times more return on investment than SPDR STOXX. However, Xtrackers MSCI Europe is 1.25 times less risky than SPDR STOXX. It trades about 0.07 of its potential returns per unit of risk. SPDR STOXX Europe is currently generating about 0.04 per unit of risk. If you would invest 3,285 in Xtrackers MSCI Europe on August 28, 2024 and sell it today you would earn a total of 858.00 from holding Xtrackers MSCI Europe or generate 26.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Xtrackers MSCI Europe vs. SPDR STOXX Europe
Performance |
| Timeline |
| Xtrackers MSCI Europe |
| SPDR STOXX Europe |
Xtrackers MSCI and SPDR STOXX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Xtrackers MSCI and SPDR STOXX
The main advantage of trading using opposite Xtrackers MSCI and SPDR STOXX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers MSCI position performs unexpectedly, SPDR STOXX 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 SPDR STOXX will offset losses from the drop in SPDR STOXX's long position.| Xtrackers MSCI vs. WisdomTree International Hedged | Xtrackers MSCI vs. WisdomTree Emerging Markets | Xtrackers MSCI vs. WisdomTree Dynamic Currency |
| SPDR STOXX vs. SPDR Bloomberg Barclays | SPDR STOXX vs. SPDR Kensho Future | SPDR STOXX vs. SPDR Kensho Intelligent | SPDR STOXX vs. SPDR SP Kensho |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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