Correlation Between Xtrackers ShortDAX and IShares NASDAQ

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

By analyzing existing cross correlation between Xtrackers ShortDAX Daily and iShares NASDAQ 100, you can compare the effects of market volatilities on Xtrackers ShortDAX and IShares NASDAQ 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 ShortDAX with a short position of IShares NASDAQ. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers ShortDAX and IShares NASDAQ.

Diversification Opportunities for Xtrackers ShortDAX and IShares NASDAQ

-0.63

Correlation Coefficient

Xtrackers ShortDAX  IShares NASDAQ

Excellent diversification

The 3 months correlation between Xtrackers and IShares is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers ShortDAX Daily and iShares NASDAQ 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares NASDAQ 100 and Xtrackers ShortDAX 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 ShortDAX Daily are associated (or correlated) with IShares NASDAQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares NASDAQ 100 has no effect on the direction of Xtrackers ShortDAX i.e., Xtrackers ShortDAX and IShares NASDAQ go up and down completely randomly.

Pair Corralation between Xtrackers ShortDAX and IShares NASDAQ

Assuming the 90 days trading horizon Xtrackers ShortDAX Daily is expected to under-perform the IShares NASDAQ. In addition to that, Xtrackers ShortDAX is 1.85 times more volatile than iShares NASDAQ 100. It trades about -0.03 of its total potential returns per unit of risk. iShares NASDAQ 100 is currently generating about 0.3 per unit of volatility. If you would invest  114,480  in iShares NASDAQ 100 on May 3, 2025 and sell it today you would earn a total of  19,680  from holding iShares NASDAQ 100 or generate 17.19% return on investment over 90 days.

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

Xtrackers ShortDAX Daily  vs.  iShares NASDAQ 100

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.

iShares NASDAQ 100

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares NASDAQ 100 are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, IShares NASDAQ unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xtrackers ShortDAX and IShares NASDAQ

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

The idea behind Xtrackers ShortDAX Daily and iShares NASDAQ 100 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .