Correlation Between Xtrackers ShortDAX and IShares Nikkei

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

By analyzing existing cross correlation between Xtrackers ShortDAX and iShares Nikkei 225, you can compare the effects of market volatilities on Xtrackers ShortDAX and IShares Nikkei 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 Nikkei. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers ShortDAX and IShares Nikkei.

Diversification Opportunities for Xtrackers ShortDAX and IShares Nikkei

-0.86

Correlation Coefficient

Xtrackers ShortDAX  IShares Nikkei

Pay attention - limited upside

The 3 months correlation between Xtrackers and IShares is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers ShortDAX and iShares Nikkei 225 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Nikkei 225 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 IShares Nikkei. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Nikkei 225 has no effect on the direction of Xtrackers ShortDAX i.e., Xtrackers ShortDAX and IShares Nikkei go up and down completely randomly.

Pair Corralation between Xtrackers ShortDAX and IShares Nikkei

Assuming the 90 days trading horizon Xtrackers ShortDAX is expected to under-perform the IShares Nikkei. In addition to that, Xtrackers ShortDAX is 1.79 times more volatile than iShares Nikkei 225. It trades about -0.15 of its total potential returns per unit of risk. iShares Nikkei 225 is currently generating about 0.09 per unit of volatility. If you would invest  2,190  in iShares Nikkei 225 on April 24, 2025 and sell it today you would earn a total of  119.00  from holding iShares Nikkei 225 or generate 5.43% return on investment over 90 days.

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

Xtrackers ShortDAX  vs.  iShares Nikkei 225

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.

iShares Nikkei 225

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Nikkei 225 are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, IShares Nikkei 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 IShares Nikkei

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

The idea behind Xtrackers ShortDAX and iShares Nikkei 225 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.