Correlation Between Xtrackers Nikkei and Xtrackers ShortDAX
Can any of the company-specific risk be diversified away by investing in both Xtrackers Nikkei and Xtrackers ShortDAX 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 Nikkei and Xtrackers ShortDAX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Xtrackers Nikkei 225 and Xtrackers ShortDAX, you can compare the effects of market volatilities on Xtrackers Nikkei and Xtrackers ShortDAX 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 Nikkei with a short position of Xtrackers ShortDAX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers Nikkei and Xtrackers ShortDAX.
Diversification Opportunities for Xtrackers Nikkei and Xtrackers ShortDAX
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Xtrackers and Xtrackers is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers Nikkei 225 and Xtrackers ShortDAX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers ShortDAX and Xtrackers Nikkei 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 Nikkei 225 are associated (or correlated) with Xtrackers ShortDAX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers ShortDAX has no effect on the direction of Xtrackers Nikkei i.e., Xtrackers Nikkei and Xtrackers ShortDAX go up and down completely randomly.
Pair Corralation between Xtrackers Nikkei and Xtrackers ShortDAX
Assuming the 90 days trading horizon Xtrackers Nikkei 225 is expected to generate 0.66 times more return on investment than Xtrackers ShortDAX. However, Xtrackers Nikkei 225 is 1.51 times less risky than Xtrackers ShortDAX. It trades about 0.09 of its potential returns per unit of risk. Xtrackers ShortDAX is currently generating about -0.24 per unit of risk. If you would invest 2,401 in Xtrackers Nikkei 225 on November 1, 2024 and sell it today you would earn a total of 111.00 from holding Xtrackers Nikkei 225 or generate 4.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Xtrackers Nikkei 225 vs. Xtrackers ShortDAX
Performance |
| Timeline |
| Xtrackers Nikkei 225 |
| Xtrackers ShortDAX |
Xtrackers Nikkei and Xtrackers ShortDAX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Xtrackers Nikkei and Xtrackers ShortDAX
The main advantage of trading using opposite Xtrackers Nikkei and Xtrackers ShortDAX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers Nikkei position performs unexpectedly, Xtrackers ShortDAX 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 ShortDAX will offset losses from the drop in Xtrackers ShortDAX's long position.The idea behind Xtrackers Nikkei 225 and Xtrackers ShortDAX 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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