Correlation Between Materials Select and Xtrackers RREEF
Can any of the company-specific risk be diversified away by investing in both Materials Select and Xtrackers RREEF 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 Materials Select and Xtrackers RREEF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Materials Select Sector and Xtrackers RREEF Global, you can compare the effects of market volatilities on Materials Select and Xtrackers RREEF 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 Materials Select with a short position of Xtrackers RREEF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Materials Select and Xtrackers RREEF.
Diversification Opportunities for Materials Select and Xtrackers RREEF
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Materials and Xtrackers is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Materials Select Sector and Xtrackers RREEF Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers RREEF Global and Materials Select 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 Materials Select Sector are associated (or correlated) with Xtrackers RREEF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers RREEF Global has no effect on the direction of Materials Select i.e., Materials Select and Xtrackers RREEF go up and down completely randomly.
Pair Corralation between Materials Select and Xtrackers RREEF
Considering the 90-day investment horizon Materials Select Sector is expected to generate 0.85 times more return on investment than Xtrackers RREEF. However, Materials Select Sector is 1.18 times less risky than Xtrackers RREEF. It trades about 0.06 of its potential returns per unit of risk. Xtrackers RREEF Global is currently generating about 0.04 per unit of risk. If you would invest 8,645 in Materials Select Sector on August 27, 2024 and sell it today you would earn a total of 764.00 from holding Materials Select Sector or generate 8.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Materials Select Sector vs. Xtrackers RREEF Global
Performance |
| Timeline |
| Materials Select Sector |
| Xtrackers RREEF Global |
Materials Select and Xtrackers RREEF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Materials Select and Xtrackers RREEF
The main advantage of trading using opposite Materials Select and Xtrackers RREEF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Materials Select position performs unexpectedly, Xtrackers RREEF 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 RREEF will offset losses from the drop in Xtrackers RREEF's long position.| Materials Select vs. Industrial Select Sector | Materials Select vs. Consumer Discretionary Select | Materials Select vs. Consumer Staples Select | Materials Select vs. Utilities Select Sector |
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.
Other Complementary Tools
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm |