Correlation Between IShares Core and Xtrackers ShortDAX

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

By analyzing existing cross correlation between iShares Core MSCI and Xtrackers ShortDAX Daily, you can compare the effects of market volatilities on IShares Core and Xtrackers ShortDAX 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 IShares Core with a short position of Xtrackers ShortDAX. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and Xtrackers ShortDAX.

Diversification Opportunities for IShares Core and Xtrackers ShortDAX

-0.68

Correlation Coefficient

IShares Core  Xtrackers ShortDAX

Excellent diversification

The 3 months correlation between IShares and Xtrackers is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core MSCI and Xtrackers ShortDAX Daily in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers ShortDAX Daily and IShares Core 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 iShares Core MSCI are associated (or correlated) with Xtrackers ShortDAX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers ShortDAX Daily has no effect on the direction of IShares Core i.e., IShares Core and Xtrackers ShortDAX go up and down completely randomly.

Pair Corralation between IShares Core and Xtrackers ShortDAX

Assuming the 90 days trading horizon iShares Core MSCI is expected to generate 0.51 times more return on investment than Xtrackers ShortDAX. However, iShares Core MSCI is 1.97 times less risky than Xtrackers ShortDAX. It trades about 0.2 of its potential returns per unit of risk. Xtrackers ShortDAX Daily is currently generating about -0.05 per unit of risk. If you would invest  3,627  in iShares Core MSCI on May 1, 2025 and sell it today you would earn a total of  374.00  from holding iShares Core MSCI or generate 10.31% return on investment over 90 days.

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

iShares Core MSCI  vs.  Xtrackers ShortDAX Daily

iShares Core MSCI

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core MSCI are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, IShares Core may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Xtrackers ShortDAX Daily

Risk-Adjusted Performance

Very Weak

Over the last 90 days Xtrackers ShortDAX Daily has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Xtrackers ShortDAX is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with IShares Core and Xtrackers ShortDAX

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

The idea behind iShares Core MSCI and Xtrackers ShortDAX Daily 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.