Correlation Between Xtrackers MSCI and Xtrackers ShortDAX

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

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

Diversification Opportunities for Xtrackers MSCI and Xtrackers ShortDAX

-0.73

Correlation Coefficient

Xtrackers MSCI  Xtrackers ShortDAX

Pay attention - limited upside

The 3 months correlation between Xtrackers and Xtrackers is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers MSCI AC 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 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 AC 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 Xtrackers MSCI i.e., Xtrackers MSCI and Xtrackers ShortDAX go up and down completely randomly.

Pair Corralation between Xtrackers MSCI and Xtrackers ShortDAX

Assuming the 90 days trading horizon Xtrackers MSCI AC is expected to generate 1.17 times more return on investment than Xtrackers ShortDAX. However, Xtrackers MSCI is 1.17 times more volatile than Xtrackers ShortDAX Daily. It trades about 0.15 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  4,251  in Xtrackers MSCI AC on May 1, 2025 and sell it today you would earn a total of  355.00  from holding Xtrackers MSCI AC or generate 8.35% return on investment over 90 days.

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

Xtrackers MSCI AC  vs.  Xtrackers ShortDAX Daily

Xtrackers MSCI AC

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers MSCI AC are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Xtrackers MSCI 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 Xtrackers MSCI and Xtrackers ShortDAX

The main advantage of trading using opposite Xtrackers MSCI and Xtrackers ShortDAX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers MSCI 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 Xtrackers MSCI AC 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.