Correlation Between Xtrackers ShortDAX and Novanta

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

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

Diversification Opportunities for Xtrackers ShortDAX and Novanta

-0.66

Correlation Coefficient

Xtrackers ShortDAX  Novanta

Excellent diversification

The 3 months correlation between Xtrackers and Novanta is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers ShortDAX and Novanta in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novanta 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 are associated (or correlated) with Novanta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Novanta has no effect on the direction of Xtrackers ShortDAX i.e., Xtrackers ShortDAX and Novanta go up and down completely randomly.

Pair Corralation between Xtrackers ShortDAX and Novanta

Assuming the 90 days trading horizon Xtrackers ShortDAX is expected to under-perform the Novanta. But the etf apears to be less risky and, when comparing its historical volatility, Xtrackers ShortDAX is 1.11 times less risky than Novanta. The etf trades about -0.12 of its potential returns per unit of risk. The Novanta is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  10,600  in Novanta on April 25, 2025 and sell it today you would lose (200.00) from holding Novanta or give up 1.89% of portfolio value over 90 days.

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

Xtrackers ShortDAX  vs.  Novanta

Xtrackers ShortDAX

Risk-Adjusted Performance

Very Weak

Over the last 90 days Xtrackers ShortDAX has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Etf's basic indicators remain nearly stable which may send shares a bit higher in August 2025. The current disturbance may also be a sign of long-run up-swing for the Exchange Traded Fund stockholders.

Novanta

Risk-Adjusted Performance

Weak

Over the last 90 days Novanta has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Novanta is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Xtrackers ShortDAX and Novanta

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

The idea behind Xtrackers ShortDAX and Novanta 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.