Correlation Between Vanguard and Xtrackers ShortDAX

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

By analyzing existing cross correlation between Vanguard SP 500 and Xtrackers ShortDAX Daily, you can compare the effects of market volatilities on Vanguard 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 Vanguard with a short position of Xtrackers ShortDAX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard and Xtrackers ShortDAX.

Diversification Opportunities for Vanguard and Xtrackers ShortDAX

-0.31

Correlation Coefficient

Vanguard  Xtrackers ShortDAX

Very good diversification

The 3 months correlation between Vanguard and Xtrackers is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP 500 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 Vanguard 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 Vanguard SP 500 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 Vanguard i.e., Vanguard and Xtrackers ShortDAX go up and down completely randomly.

Pair Corralation between Vanguard and Xtrackers ShortDAX

Assuming the 90 days trading horizon Vanguard SP 500 is expected to generate 5.33 times more return on investment than Xtrackers ShortDAX. However, Vanguard is 5.33 times more volatile than Xtrackers ShortDAX Daily. It trades about 0.17 of its potential returns per unit of risk. Xtrackers ShortDAX Daily is currently generating about -0.11 per unit of risk. If you would invest  6,668  in Vanguard SP 500 on May 1, 2025 and sell it today you would earn a total of  3,093  from holding Vanguard SP 500 or generate 46.39% return on investment over 90 days.

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

Vanguard SP 500  vs.  Xtrackers ShortDAX Daily

Vanguard SP 500

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard SP 500 are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Vanguard showed solid returns over the last few months and may actually be approaching a breakup point.

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 Vanguard and Xtrackers ShortDAX

The main advantage of trading using opposite Vanguard and Xtrackers ShortDAX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard 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 Vanguard SP 500 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.

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 Money Managers module to screen money managers from public funds and ETFs managed around the world.