Correlation Between Xtrackers Nikkei and IShares STOXX
Can any of the company-specific risk be diversified away by investing in both Xtrackers Nikkei and IShares STOXX 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 IShares STOXX 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 iShares STOXX Europe, you can compare the effects of market volatilities on Xtrackers Nikkei and IShares STOXX 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 IShares STOXX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers Nikkei and IShares STOXX.
Diversification Opportunities for Xtrackers Nikkei and IShares STOXX
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Xtrackers and IShares is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers Nikkei 225 and iShares STOXX Europe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares STOXX Europe 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 IShares STOXX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares STOXX Europe has no effect on the direction of Xtrackers Nikkei i.e., Xtrackers Nikkei and IShares STOXX go up and down completely randomly.
Pair Corralation between Xtrackers Nikkei and IShares STOXX
Assuming the 90 days trading horizon Xtrackers Nikkei 225 is expected to generate 1.09 times more return on investment than IShares STOXX. However, Xtrackers Nikkei is 1.09 times more volatile than iShares STOXX Europe. It trades about 0.3 of its potential returns per unit of risk. iShares STOXX Europe is currently generating about -0.08 per unit of risk. If you would invest 2,397 in Xtrackers Nikkei 225 on September 5, 2024 and sell it today you would earn a total of 175.00 from holding Xtrackers Nikkei 225 or generate 7.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Xtrackers Nikkei 225 vs. iShares STOXX Europe
Performance |
| Timeline |
| Xtrackers Nikkei 225 |
| iShares STOXX Europe |
Xtrackers Nikkei and IShares STOXX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Xtrackers Nikkei and IShares STOXX
The main advantage of trading using opposite Xtrackers Nikkei and IShares STOXX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers Nikkei position performs unexpectedly, IShares STOXX 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 STOXX will offset losses from the drop in IShares STOXX's long position.| Xtrackers Nikkei vs. UBS Fund Solutions | Xtrackers Nikkei vs. Xtrackers II | Xtrackers Nikkei vs. SPDR Gold Shares | Xtrackers Nikkei vs. Vanguard Funds Public |
| IShares STOXX vs. UBS Fund Solutions | IShares STOXX vs. Xtrackers II | IShares STOXX vs. Xtrackers Nikkei 225 | IShares STOXX vs. SPDR Gold Shares |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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