Correlation Between Barings Global and Lyxor 1

Can any of the company-specific risk be diversified away by investing in both Barings Global and Lyxor 1 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 Barings Global and Lyxor 1 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Barings Global Umbrella and Lyxor 1 , you can compare the effects of market volatilities on Barings Global and Lyxor 1 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 Barings Global with a short position of Lyxor 1. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barings Global and Lyxor 1.

Diversification Opportunities for Barings Global and Lyxor 1

0.65

Correlation Coefficient

Barings Global  Lyxor 1

Poor diversification

The 3 months correlation between Barings and Lyxor is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Barings Global Umbrella and Lyxor 1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyxor 1 and Barings Global 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 Barings Global Umbrella are associated (or correlated) with Lyxor 1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lyxor 1 has no effect on the direction of Barings Global i.e., Barings Global and Lyxor 1 go up and down completely randomly.

Pair Corralation between Barings Global and Lyxor 1

Assuming the 90 days trading horizon Barings Global is expected to generate 2.33 times less return on investment than Lyxor 1. But when comparing it to its historical volatility, Barings Global Umbrella is 1.6 times less risky than Lyxor 1. It trades about 0.13 of its potential returns per unit of risk. Lyxor 1 is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  2,429  in Lyxor 1 on September 22, 2024 and sell it today you would earn a total of  69.00  from holding Lyxor 1 or generate 2.84% return on investment over 90 days.

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

Barings Global Umbrella  vs.  Lyxor 1

Barings Global Umbrella

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Barings Global Umbrella are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat fragile basic indicators, Barings Global may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Lyxor 1

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor 1 are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Lyxor 1 is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Barings Global and Lyxor 1

The main advantage of trading using opposite Barings Global and Lyxor 1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barings Global position performs unexpectedly, Lyxor 1 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 Lyxor 1 will offset losses from the drop in Lyxor 1's long position.

The idea behind Barings Global Umbrella and Lyxor 1 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 Stocks Directory module to find actively traded stocks across global markets.