Correlation Between Xtrackers Low and Xtrackers High
Can any of the company-specific risk be diversified away by investing in both Xtrackers Low and Xtrackers High 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 Low and Xtrackers High into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Xtrackers Low Beta and Xtrackers High Beta, you can compare the effects of market volatilities on Xtrackers Low and Xtrackers High 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 Low with a short position of Xtrackers High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers Low and Xtrackers High.
Diversification Opportunities for Xtrackers Low and Xtrackers High
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Xtrackers and Xtrackers is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers Low Beta and Xtrackers High Beta in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers High Beta and Xtrackers Low 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 Low Beta are associated (or correlated) with Xtrackers High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers High Beta has no effect on the direction of Xtrackers Low i.e., Xtrackers Low and Xtrackers High go up and down completely randomly.
Pair Corralation between Xtrackers Low and Xtrackers High
Given the investment horizon of 90 days Xtrackers Low is expected to generate 1.94 times less return on investment than Xtrackers High. But when comparing it to its historical volatility, Xtrackers Low Beta is 1.05 times less risky than Xtrackers High. It trades about 0.12 of its potential returns per unit of risk. Xtrackers High Beta is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 4,202 in Xtrackers High Beta on August 28, 2024 and sell it today you would earn a total of 44.00 from holding Xtrackers High Beta or generate 1.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Xtrackers Low Beta vs. Xtrackers High Beta
Performance |
| Timeline |
| Xtrackers Low Beta |
| Xtrackers High Beta |
Xtrackers Low and Xtrackers High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Xtrackers Low and Xtrackers High
The main advantage of trading using opposite Xtrackers Low and Xtrackers High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers Low position performs unexpectedly, Xtrackers High 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 Xtrackers High will offset losses from the drop in Xtrackers High's long position.| Xtrackers Low vs. Xtrackers High Beta | Xtrackers Low vs. Xtrackers Short Duration | Xtrackers Low vs. Goldman Sachs Access | Xtrackers Low vs. FlexShares High Yield |
| Xtrackers High vs. Xtrackers Short Duration | Xtrackers High vs. FlexShares High Yield | Xtrackers High vs. Xtrackers Low Beta | Xtrackers High vs. iShares Edge High |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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