Correlation Between Xtrackers Nikkei and Ishares II
Can any of the company-specific risk be diversified away by investing in both Xtrackers Nikkei and Ishares II 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 II 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 II PLC, you can compare the effects of market volatilities on Xtrackers Nikkei and Ishares II 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 II. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers Nikkei and Ishares II.
Diversification Opportunities for Xtrackers Nikkei and Ishares II
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Xtrackers and Ishares is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers Nikkei 225 and Ishares II PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ishares II PLC 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 II. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ishares II PLC has no effect on the direction of Xtrackers Nikkei i.e., Xtrackers Nikkei and Ishares II go up and down completely randomly.
Pair Corralation between Xtrackers Nikkei and Ishares II
Assuming the 90 days trading horizon Xtrackers Nikkei 225 is expected to generate 3.87 times more return on investment than Ishares II. However, Xtrackers Nikkei is 3.87 times more volatile than Ishares II PLC. It trades about 0.08 of its potential returns per unit of risk. Ishares II PLC is currently generating about 0.03 per unit of risk. If you would invest 2,408 in Xtrackers Nikkei 225 on September 12, 2024 and sell it today you would earn a total of 139.00 from holding Xtrackers Nikkei 225 or generate 5.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.31% |
| Values | Daily Returns |
Xtrackers Nikkei 225 vs. Ishares II PLC
Performance |
| Timeline |
| Xtrackers Nikkei 225 |
| Ishares II PLC |
Xtrackers Nikkei and Ishares II Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Xtrackers Nikkei and Ishares II
The main advantage of trading using opposite Xtrackers Nikkei and Ishares II positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers Nikkei position performs unexpectedly, Ishares II 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 II will offset losses from the drop in Ishares II's long position.| Xtrackers Nikkei vs. UBS Fund Solutions | Xtrackers Nikkei vs. Xtrackers II | Xtrackers Nikkei vs. iShares VII PLC | Xtrackers Nikkei vs. SPDR Gold Shares |
| Ishares II vs. UBS Fund Solutions | Ishares II vs. Xtrackers II | Ishares II vs. Xtrackers Nikkei 225 | Ishares II vs. iShares VII PLC |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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