Correlation Between HCM Defender and Xtrackers
Can any of the company-specific risk be diversified away by investing in both HCM Defender and Xtrackers 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 HCM Defender and Xtrackers into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HCM Defender 500 and Xtrackers SP 500, you can compare the effects of market volatilities on HCM Defender and Xtrackers 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 HCM Defender with a short position of Xtrackers. Check out your portfolio center. Please also check ongoing floating volatility patterns of HCM Defender and Xtrackers.
Diversification Opportunities for HCM Defender and Xtrackers
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between HCM and Xtrackers is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding HCM Defender 500 and Xtrackers SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers SP 500 and HCM Defender 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 HCM Defender 500 are associated (or correlated) with Xtrackers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers SP 500 has no effect on the direction of HCM Defender i.e., HCM Defender and Xtrackers go up and down completely randomly.
Pair Corralation between HCM Defender and Xtrackers
Considering the 90-day investment horizon HCM Defender 500 is expected to generate 1.39 times more return on investment than Xtrackers. However, HCM Defender is 1.39 times more volatile than Xtrackers SP 500. It trades about 0.14 of its potential returns per unit of risk. Xtrackers SP 500 is currently generating about 0.14 per unit of risk. If you would invest 5,135 in HCM Defender 500 on August 26, 2024 and sell it today you would earn a total of 191.00 from holding HCM Defender 500 or generate 3.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
HCM Defender 500 vs. Xtrackers SP 500
Performance |
| Timeline |
| HCM Defender 500 |
| Xtrackers SP 500 |
HCM Defender and Xtrackers Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HCM Defender and Xtrackers
The main advantage of trading using opposite HCM Defender and Xtrackers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HCM Defender position performs unexpectedly, Xtrackers 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 will offset losses from the drop in Xtrackers' long position.| HCM Defender vs. Morningstar Unconstrained Allocation | HCM Defender vs. High Yield Municipal Fund | HCM Defender vs. Via Renewables | HCM Defender vs. Knife River |
| Xtrackers vs. Morningstar Unconstrained Allocation | Xtrackers vs. High Yield Municipal Fund | Xtrackers vs. Via Renewables | Xtrackers vs. Knife River |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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