Correlation Between Xtrackers LevDAX and Freeport McMoRan

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

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

Diversification Opportunities for Xtrackers LevDAX and Freeport McMoRan

0.79

Correlation Coefficient

Xtrackers LevDAX  Freeport McMoRan

Poor diversification

The 3 months correlation between Xtrackers and Freeport is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers LevDAX and Freeport McMoRan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freeport McMoRan and Xtrackers LevDAX 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 LevDAX are associated (or correlated) with Freeport McMoRan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freeport McMoRan has no effect on the direction of Xtrackers LevDAX i.e., Xtrackers LevDAX and Freeport McMoRan go up and down completely randomly.

Pair Corralation between Xtrackers LevDAX and Freeport McMoRan

Assuming the 90 days trading horizon Xtrackers LevDAX is expected to generate 1.28 times less return on investment than Freeport McMoRan. But when comparing it to its historical volatility, Xtrackers LevDAX is 1.54 times less risky than Freeport McMoRan. It trades about 0.22 of its potential returns per unit of risk. Freeport McMoRan is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  2,857  in Freeport McMoRan on April 21, 2025 and sell it today you would earn a total of  973.00  from holding Freeport McMoRan or generate 34.06% return on investment over 90 days.

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

Xtrackers LevDAX  vs.  Freeport McMoRan

Xtrackers LevDAX

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers LevDAX are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Xtrackers LevDAX reported solid returns over the last few months and may actually be approaching a breakup point.

Freeport McMoRan

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Freeport McMoRan are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain primary indicators, Freeport McMoRan reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xtrackers LevDAX and Freeport McMoRan

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

The idea behind Xtrackers LevDAX and Freeport McMoRan 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.