Correlation Between Xtrackers Nikkei and IShares Nikkei
Can any of the company-specific risk be diversified away by investing in both Xtrackers Nikkei and IShares Nikkei 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 Nikkei 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 Nikkei 225, you can compare the effects of market volatilities on Xtrackers Nikkei and IShares Nikkei 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 Nikkei. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers Nikkei and IShares Nikkei.
Diversification Opportunities for Xtrackers Nikkei and IShares Nikkei
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Xtrackers and IShares is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers Nikkei 225 and iShares Nikkei 225 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Nikkei 225 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 Nikkei. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Nikkei 225 has no effect on the direction of Xtrackers Nikkei i.e., Xtrackers Nikkei and IShares Nikkei go up and down completely randomly.
Pair Corralation between Xtrackers Nikkei and IShares Nikkei
Assuming the 90 days trading horizon Xtrackers Nikkei 225 is expected to generate 1.05 times more return on investment than IShares Nikkei. However, Xtrackers Nikkei is 1.05 times more volatile than iShares Nikkei 225. It trades about 0.12 of its potential returns per unit of risk. iShares Nikkei 225 is currently generating about 0.01 per unit of risk. If you would invest 2,405 in Xtrackers Nikkei 225 on August 28, 2024 and sell it today you would earn a total of 61.00 from holding Xtrackers Nikkei 225 or generate 2.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Xtrackers Nikkei 225 vs. iShares Nikkei 225
Performance |
| Timeline |
| Xtrackers Nikkei 225 |
| iShares Nikkei 225 |
Xtrackers Nikkei and IShares Nikkei Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Xtrackers Nikkei and IShares Nikkei
The main advantage of trading using opposite Xtrackers Nikkei and IShares Nikkei positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers Nikkei position performs unexpectedly, IShares Nikkei 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 Nikkei will offset losses from the drop in IShares Nikkei's long position.| Xtrackers Nikkei vs. SPDR Gold Shares | Xtrackers Nikkei vs. iShares Core SP | Xtrackers Nikkei vs. iShares Core MSCI |
| IShares Nikkei vs. SPDR Gold Shares | IShares Nikkei vs. iShares Core SP | IShares Nikkei vs. iShares Core MSCI |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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