Correlation Between Xtrackers LevDAX and Walt Disney

Can any of the company-specific risk be diversified away by investing in both Xtrackers LevDAX and Walt Disney 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 LevDAX and Walt Disney into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Xtrackers LevDAX and The Walt Disney, you can compare the effects of market volatilities on Xtrackers LevDAX and Walt Disney 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 LevDAX with a short position of Walt Disney. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers LevDAX and Walt Disney.

Diversification Opportunities for Xtrackers LevDAX and Walt Disney

0.81

Correlation Coefficient

Xtrackers LevDAX  Walt Disney

Very poor diversification

The 3 months correlation between Xtrackers and Walt is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers LevDAX and The Walt Disney in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walt Disney and Xtrackers LevDAX 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 LevDAX are associated (or correlated) with Walt Disney. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walt Disney has no effect on the direction of Xtrackers LevDAX i.e., Xtrackers LevDAX and Walt Disney go up and down completely randomly.

Pair Corralation between Xtrackers LevDAX and Walt Disney

Assuming the 90 days trading horizon Xtrackers LevDAX is expected to generate 1.19 times more return on investment than Walt Disney. However, Xtrackers LevDAX is 1.19 times more volatile than The Walt Disney. It trades about -0.04 of its potential returns per unit of risk. The Walt Disney is currently generating about -0.33 per unit of risk. If you would invest  17,686  in Xtrackers LevDAX on January 30, 2024 and sell it today you would lose (252.00) from holding Xtrackers LevDAX or give up 1.42% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Xtrackers LevDAX  vs.  The Walt Disney

Xtrackers LevDAX

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers LevDAX are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Xtrackers LevDAX reported solid returns over the last few months and may actually be approaching a breakup point.

Walt Disney

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Walt Disney are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Walt Disney reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xtrackers LevDAX and Walt Disney

The main advantage of trading using opposite Xtrackers LevDAX and Walt Disney positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers LevDAX position performs unexpectedly, Walt Disney 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 Walt Disney will offset losses from the drop in Walt Disney's long position.

The idea behind Xtrackers LevDAX and The Walt Disney pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.