Correlation Between Xtrackers ShortDAX and BASF SE

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Can any of the company-specific risk be diversified away by investing in both Xtrackers ShortDAX and BASF SE 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 ShortDAX and BASF SE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Xtrackers ShortDAX and BASF SE, you can compare the effects of market volatilities on Xtrackers ShortDAX and BASF SE 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 ShortDAX with a short position of BASF SE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers ShortDAX and BASF SE.

Diversification Opportunities for Xtrackers ShortDAX and BASF SE

XtrackersBASFDiversified AwayXtrackersBASFDiversified Away100%
-0.78
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Xtrackers and BASF is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers ShortDAX and BASF SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BASF SE and Xtrackers ShortDAX 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 ShortDAX are associated (or correlated) with BASF SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BASF SE has no effect on the direction of Xtrackers ShortDAX i.e., Xtrackers ShortDAX and BASF SE go up and down completely randomly.

Pair Corralation between Xtrackers ShortDAX and BASF SE

Assuming the 90 days trading horizon Xtrackers ShortDAX is expected to under-perform the BASF SE. In addition to that, Xtrackers ShortDAX is 1.09 times more volatile than BASF SE. It trades about -0.07 of its total potential returns per unit of risk. BASF SE is currently generating about 0.01 per unit of volatility. If you would invest  4,905  in BASF SE on November 21, 2024 and sell it today you would earn a total of  109.00  from holding BASF SE or generate 2.22% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy97.81%
ValuesDaily Returns

Xtrackers ShortDAX  vs.  BASF SE

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -20-15-10-50510
JavaScript chart by amCharts 3.21.15DBPD BAS
       Timeline  
Xtrackers ShortDAX 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Xtrackers ShortDAX has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Etf's basic indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the Exchange Traded Fund stockholders.
BASF SE 

Risk-Adjusted Performance

Good

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in BASF SE are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, BASF SE reported solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb424446485052

Xtrackers ShortDAX and BASF SE Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-2.69-2.07-1.45-0.83-0.220.330.891.452.01 0.060.080.100.120.140.160.18
JavaScript chart by amCharts 3.21.15DBPD BAS
       Returns  

Pair Trading with Xtrackers ShortDAX and BASF SE

The main advantage of trading using opposite Xtrackers ShortDAX and BASF SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers ShortDAX position performs unexpectedly, BASF SE 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 BASF SE will offset losses from the drop in BASF SE's long position.
The idea behind Xtrackers ShortDAX and BASF SE 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.

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