Correlation Between Xtrackers ShortDAX and Telefonaktiebolaget
Can any of the company-specific risk be diversified away by investing in both Xtrackers ShortDAX and Telefonaktiebolaget 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 Telefonaktiebolaget into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Xtrackers ShortDAX and Telefonaktiebolaget LM Ericsson, you can compare the effects of market volatilities on Xtrackers ShortDAX and Telefonaktiebolaget 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 Telefonaktiebolaget. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers ShortDAX and Telefonaktiebolaget.
Diversification Opportunities for Xtrackers ShortDAX and Telefonaktiebolaget
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Xtrackers and Telefonaktiebolaget is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers ShortDAX and Telefonaktiebolaget LM Ericsso in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefonaktiebolaget 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 Telefonaktiebolaget. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telefonaktiebolaget has no effect on the direction of Xtrackers ShortDAX i.e., Xtrackers ShortDAX and Telefonaktiebolaget go up and down completely randomly.
Pair Corralation between Xtrackers ShortDAX and Telefonaktiebolaget
Assuming the 90 days trading horizon Xtrackers ShortDAX is expected to generate 22.19 times less return on investment than Telefonaktiebolaget. But when comparing it to its historical volatility, Xtrackers ShortDAX is 2.81 times less risky than Telefonaktiebolaget. It trades about 0.03 of its potential returns per unit of risk. Telefonaktiebolaget LM Ericsson is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 553.00 in Telefonaktiebolaget LM Ericsson on August 28, 2024 and sell it today you would earn a total of 217.00 from holding Telefonaktiebolaget LM Ericsson or generate 39.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Xtrackers ShortDAX vs. Telefonaktiebolaget LM Ericsso
Performance |
| Timeline |
| Xtrackers ShortDAX |
| Telefonaktiebolaget |
Xtrackers ShortDAX and Telefonaktiebolaget Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Xtrackers ShortDAX and Telefonaktiebolaget
The main advantage of trading using opposite Xtrackers ShortDAX and Telefonaktiebolaget positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers ShortDAX position performs unexpectedly, Telefonaktiebolaget 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 Telefonaktiebolaget will offset losses from the drop in Telefonaktiebolaget's long position.| Xtrackers ShortDAX vs. Xtrackers II Global | Xtrackers ShortDAX vs. Xtrackers FTSE | Xtrackers ShortDAX vs. Xtrackers SP 500 | Xtrackers ShortDAX vs. Xtrackers MSCI |
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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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