Correlation Between Xtrackers LevDAX and Tokyo Electron
Can any of the company-specific risk be diversified away by investing in both Xtrackers LevDAX and Tokyo Electron 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 Tokyo Electron into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Xtrackers LevDAX and Tokyo Electron Limited, you can compare the effects of market volatilities on Xtrackers LevDAX and Tokyo Electron 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 Tokyo Electron. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers LevDAX and Tokyo Electron.
Diversification Opportunities for Xtrackers LevDAX and Tokyo Electron
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Xtrackers and Tokyo is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers LevDAX and Tokyo Electron Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tokyo Electron 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 Tokyo Electron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tokyo Electron has no effect on the direction of Xtrackers LevDAX i.e., Xtrackers LevDAX and Tokyo Electron go up and down completely randomly.
Pair Corralation between Xtrackers LevDAX and Tokyo Electron
Assuming the 90 days trading horizon Xtrackers LevDAX is expected to generate 0.4 times more return on investment than Tokyo Electron. However, Xtrackers LevDAX is 2.49 times less risky than Tokyo Electron. It trades about 0.6 of its potential returns per unit of risk. Tokyo Electron Limited is currently generating about 0.17 per unit of risk. If you would invest 19,944 in Xtrackers LevDAX on November 4, 2024 and sell it today you would earn a total of 3,546 from holding Xtrackers LevDAX or generate 17.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Xtrackers LevDAX vs. Tokyo Electron Limited
Performance |
| Timeline |
| Xtrackers LevDAX |
| Tokyo Electron |
Xtrackers LevDAX and Tokyo Electron Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Xtrackers LevDAX and Tokyo Electron
The main advantage of trading using opposite Xtrackers LevDAX and Tokyo Electron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers LevDAX position performs unexpectedly, Tokyo Electron 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 Tokyo Electron will offset losses from the drop in Tokyo Electron'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 |
| Tokyo Electron vs. ASML HOLDING NY | Tokyo Electron vs. ASML Holding NV | Tokyo Electron vs. ASML Holding NV | Tokyo Electron vs. Applied Materials |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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