Correlation Between IShares STOXX and Xtrackers ShortDAX

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

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

Diversification Opportunities for IShares STOXX and Xtrackers ShortDAX

-0.96

Correlation Coefficient

IShares STOXX  Xtrackers ShortDAX

Pay attention - limited upside

The 3 months correlation between IShares and Xtrackers is -0.96. Overlapping area represents the amount of risk that can be diversified away by holding iShares STOXX Europe and Xtrackers ShortDAX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers ShortDAX and IShares STOXX 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 iShares STOXX Europe 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 has no effect on the direction of IShares STOXX i.e., IShares STOXX and Xtrackers ShortDAX go up and down completely randomly.

Pair Corralation between IShares STOXX and Xtrackers ShortDAX

Assuming the 90 days trading horizon iShares STOXX Europe is expected to generate 0.65 times more return on investment than Xtrackers ShortDAX. However, iShares STOXX Europe is 1.54 times less risky than Xtrackers ShortDAX. It trades about 0.17 of its potential returns per unit of risk. Xtrackers ShortDAX is currently generating about -0.16 per unit of risk. If you would invest  2,441  in iShares STOXX Europe on April 23, 2025 and sell it today you would earn a total of  297.00  from holding iShares STOXX Europe or generate 12.17% return on investment over 90 days.

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

iShares STOXX Europe  vs.  Xtrackers ShortDAX

iShares STOXX Europe

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares STOXX Europe are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, IShares STOXX may actually be approaching a critical reversion point that can send shares even higher in August 2025.

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.

Pair Trading with IShares STOXX and Xtrackers ShortDAX

The main advantage of trading using opposite IShares STOXX and Xtrackers ShortDAX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares STOXX 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 iShares STOXX Europe and Xtrackers ShortDAX 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.