Correlation Between Xtrackers LevDAX and Rio Tinto
Can any of the company-specific risk be diversified away by investing in both Xtrackers LevDAX and Rio Tinto 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 LevDAX and Rio Tinto into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Xtrackers LevDAX and Rio Tinto Group, you can compare the effects of market volatilities on Xtrackers LevDAX and Rio Tinto 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 LevDAX with a short position of Rio Tinto. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers LevDAX and Rio Tinto.
Diversification Opportunities for Xtrackers LevDAX and Rio Tinto
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Xtrackers and Rio is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers LevDAX and Rio Tinto Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rio Tinto Group and Xtrackers LevDAX 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 LevDAX are associated (or correlated) with Rio Tinto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rio Tinto Group has no effect on the direction of Xtrackers LevDAX i.e., Xtrackers LevDAX and Rio Tinto go up and down completely randomly.
Pair Corralation between Xtrackers LevDAX and Rio Tinto
Assuming the 90 days trading horizon Xtrackers LevDAX is expected to under-perform the Rio Tinto. In addition to that, Xtrackers LevDAX is 1.14 times more volatile than Rio Tinto Group. It trades about -0.15 of its total potential returns per unit of risk. Rio Tinto Group is currently generating about -0.06 per unit of volatility. If you would invest 7,368 in Rio Tinto Group on August 28, 2024 and sell it today you would lose (149.00) from holding Rio Tinto Group or give up 2.02% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Xtrackers LevDAX vs. Rio Tinto Group
Performance |
| Timeline |
| Xtrackers LevDAX |
| Rio Tinto Group |
Xtrackers LevDAX and Rio Tinto Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Xtrackers LevDAX and Rio Tinto
The main advantage of trading using opposite Xtrackers LevDAX and Rio Tinto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers LevDAX position performs unexpectedly, Rio Tinto 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 Rio Tinto will offset losses from the drop in Rio Tinto's long position.| Xtrackers LevDAX vs. Xtrackers II Global | Xtrackers LevDAX vs. Xtrackers FTSE | Xtrackers LevDAX vs. Xtrackers SP 500 | Xtrackers LevDAX vs. Xtrackers MSCI |
| Rio Tinto vs. Superior Plus Corp | Rio Tinto vs. NMI Holdings | Rio Tinto vs. Origin Agritech | Rio Tinto vs. SIVERS SEMICONDUCTORS AB |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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