Correlation Between Xtrackers International and IShares Environmentally
Can any of the company-specific risk be diversified away by investing in both Xtrackers International and IShares Environmentally 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 International and IShares Environmentally into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Xtrackers International Real and iShares Environmentally Aware, you can compare the effects of market volatilities on Xtrackers International and IShares Environmentally 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 International with a short position of IShares Environmentally. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers International and IShares Environmentally.
Diversification Opportunities for Xtrackers International and IShares Environmentally
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Xtrackers and IShares is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers International Real and iShares Environmentally Aware in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Environmentally and Xtrackers International 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 International Real are associated (or correlated) with IShares Environmentally. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Environmentally has no effect on the direction of Xtrackers International i.e., Xtrackers International and IShares Environmentally go up and down completely randomly.
Pair Corralation between Xtrackers International and IShares Environmentally
Given the investment horizon of 90 days Xtrackers International is expected to generate 10.0 times less return on investment than IShares Environmentally. But when comparing it to its historical volatility, Xtrackers International Real is 1.02 times less risky than IShares Environmentally. It trades about 0.0 of its potential returns per unit of risk. iShares Environmentally Aware is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 2,463 in iShares Environmentally Aware on November 2, 2024 and sell it today you would earn a total of 101.00 from holding iShares Environmentally Aware or generate 4.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Xtrackers International Real vs. iShares Environmentally Aware
Performance |
| Timeline |
| Xtrackers International |
| iShares Environmentally |
Xtrackers International and IShares Environmentally Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Xtrackers International and IShares Environmentally
The main advantage of trading using opposite Xtrackers International and IShares Environmentally positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers International position performs unexpectedly, IShares Environmentally 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 IShares Environmentally will offset losses from the drop in IShares Environmentally's long position.The idea behind Xtrackers International Real and iShares Environmentally Aware 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.
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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