Correlation Between Xtrackers and Overlay Shares
Can any of the company-specific risk be diversified away by investing in both Xtrackers and Overlay Shares 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 and Overlay Shares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Xtrackers SP 500 and Overlay Shares Large, you can compare the effects of market volatilities on Xtrackers and Overlay Shares 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 with a short position of Overlay Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers and Overlay Shares.
Diversification Opportunities for Xtrackers and Overlay Shares
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Xtrackers and Overlay is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers SP 500 and Overlay Shares Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Overlay Shares Large and Xtrackers 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 SP 500 are associated (or correlated) with Overlay Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Overlay Shares Large has no effect on the direction of Xtrackers i.e., Xtrackers and Overlay Shares go up and down completely randomly.
Pair Corralation between Xtrackers and Overlay Shares
Given the investment horizon of 90 days Xtrackers is expected to generate 1.09 times less return on investment than Overlay Shares. But when comparing it to its historical volatility, Xtrackers SP 500 is 1.32 times less risky than Overlay Shares. It trades about 0.11 of its potential returns per unit of risk. Overlay Shares Large is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 2,954 in Overlay Shares Large on August 30, 2024 and sell it today you would earn a total of 1,863 from holding Overlay Shares Large or generate 63.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Xtrackers SP 500 vs. Overlay Shares Large
Performance |
| Timeline |
| Xtrackers SP 500 |
| Overlay Shares Large |
Xtrackers and Overlay Shares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Xtrackers and Overlay Shares
The main advantage of trading using opposite Xtrackers and Overlay Shares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers position performs unexpectedly, Overlay Shares 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 Overlay Shares will offset losses from the drop in Overlay Shares' long position.| Xtrackers vs. Xtrackers MSCI USA | Xtrackers vs. iShares ESG MSCI | Xtrackers vs. SPDR SP 500 | Xtrackers vs. iShares MSCI USA |
| Overlay Shares vs. Overlay Shares Core | Overlay Shares vs. OVS SpA | Overlay Shares vs. Overlay Shares Foreign | Overlay Shares vs. Overlay Shares Municipal |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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