Correlation Between LS 1x and Multi Units

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

By analyzing existing cross correlation between LS 1x Amazon and Multi Units Luxembourg, you can compare the effects of market volatilities on LS 1x and Multi Units 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 LS 1x with a short position of Multi Units. Check out your portfolio center. Please also check ongoing floating volatility patterns of LS 1x and Multi Units.

Diversification Opportunities for LS 1x and Multi Units

-0.86

Correlation Coefficient

LS 1x  Multi Units

Pay attention - limited upside

The 3 months correlation between 1AMZ and Multi is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding LS 1x Amazon and Multi Units Luxembourg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multi Units Luxembourg and LS 1x 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 LS 1x Amazon are associated (or correlated) with Multi Units. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multi Units Luxembourg has no effect on the direction of LS 1x i.e., LS 1x and Multi Units go up and down completely randomly.

Pair Corralation between LS 1x and Multi Units

Assuming the 90 days trading horizon LS 1x Amazon is expected to under-perform the Multi Units. But the etf apears to be less risky and, when comparing its historical volatility, LS 1x Amazon is 1.03 times less risky than Multi Units. The etf trades about -0.01 of its potential returns per unit of risk. The Multi Units Luxembourg is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  5,591  in Multi Units Luxembourg on October 23, 2024 and sell it today you would earn a total of  276.00  from holding Multi Units Luxembourg or generate 4.94% return on investment over 90 days.

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

LS 1x Amazon  vs.  Multi Units Luxembourg

LS 1x Amazon

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LS 1x Amazon are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, LS 1x unveiled solid returns over the last few months and may actually be approaching a breakup point.

Multi Units Luxembourg

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Multi Units Luxembourg has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Etf's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Pair Trading with LS 1x and Multi Units

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

The idea behind LS 1x Amazon and Multi Units Luxembourg 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.