Correlation Between Xtrackers MSCI and Xtrackers FTSE
Can any of the company-specific risk be diversified away by investing in both Xtrackers MSCI and Xtrackers FTSE 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 MSCI and Xtrackers FTSE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Xtrackers MSCI World and Xtrackers FTSE 250, you can compare the effects of market volatilities on Xtrackers MSCI and Xtrackers FTSE 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 MSCI with a short position of Xtrackers FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers MSCI and Xtrackers FTSE.
Diversification Opportunities for Xtrackers MSCI and Xtrackers FTSE
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between Xtrackers and Xtrackers is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers MSCI World and Xtrackers FTSE 250 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers FTSE 250 and Xtrackers MSCI 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 MSCI World are associated (or correlated) with Xtrackers FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers FTSE 250 has no effect on the direction of Xtrackers MSCI i.e., Xtrackers MSCI and Xtrackers FTSE go up and down completely randomly.
Pair Corralation between Xtrackers MSCI and Xtrackers FTSE
Assuming the 90 days trading horizon Xtrackers MSCI World is expected to generate 1.44 times more return on investment than Xtrackers FTSE. However, Xtrackers MSCI is 1.44 times more volatile than Xtrackers FTSE 250. It trades about 0.1 of its potential returns per unit of risk. Xtrackers FTSE 250 is currently generating about 0.04 per unit of risk. If you would invest 6,155 in Xtrackers MSCI World on August 31, 2024 and sell it today you would earn a total of 3,237 from holding Xtrackers MSCI World or generate 52.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.74% |
| Values | Daily Returns |
Xtrackers MSCI World vs. Xtrackers FTSE 250
Performance |
| Timeline |
| Xtrackers MSCI World |
| Xtrackers FTSE 250 |
Xtrackers MSCI and Xtrackers FTSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Xtrackers MSCI and Xtrackers FTSE
The main advantage of trading using opposite Xtrackers MSCI and Xtrackers FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers MSCI position performs unexpectedly, Xtrackers FTSE 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 FTSE will offset losses from the drop in Xtrackers FTSE's long position.| Xtrackers MSCI vs. Vanguard FTSE Developed | Xtrackers MSCI vs. Leverage Shares 2x | Xtrackers MSCI vs. Amundi Index Solutions | Xtrackers MSCI vs. Amundi Index Solutions |
| Xtrackers FTSE vs. GraniteShares 3x Short | Xtrackers FTSE vs. WisdomTree Natural Gas | Xtrackers FTSE vs. Leverage Shares 3x | Xtrackers FTSE vs. WisdomTree Natural Gas |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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