Correlation Between Lyxor BEL and VanEck AEX

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

By analyzing existing cross correlation between Lyxor BEL 20 and VanEck AEX UCITS, you can compare the effects of market volatilities on Lyxor BEL and VanEck AEX 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 Lyxor BEL with a short position of VanEck AEX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lyxor BEL and VanEck AEX.

Diversification Opportunities for Lyxor BEL and VanEck AEX

0.86

Correlation Coefficient

Lyxor BEL  VanEck AEX

Very poor diversification

The 3 months correlation between Lyxor and VanEck is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor BEL 20 and VanEck AEX UCITS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck AEX UCITS and Lyxor BEL 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 Lyxor BEL 20 are associated (or correlated) with VanEck AEX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck AEX UCITS has no effect on the direction of Lyxor BEL i.e., Lyxor BEL and VanEck AEX go up and down completely randomly.

Pair Corralation between Lyxor BEL and VanEck AEX

Assuming the 90 days trading horizon Lyxor BEL 20 is expected to generate 1.53 times more return on investment than VanEck AEX. However, Lyxor BEL is 1.53 times more volatile than VanEck AEX UCITS. It trades about 0.13 of its potential returns per unit of risk. VanEck AEX UCITS is currently generating about 0.03 per unit of risk. If you would invest  6,377  in Lyxor BEL 20 on December 2, 2024 and sell it today you would earn a total of  134.00  from holding Lyxor BEL 20 or generate 2.1% return on investment over 90 days.

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

Lyxor BEL 20  vs.  VanEck AEX UCITS

Lyxor BEL 20

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor BEL 20 are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable essential indicators, Lyxor BEL is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

VanEck AEX UCITS

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck AEX UCITS are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, VanEck AEX is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Lyxor BEL and VanEck AEX

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

The idea behind Lyxor BEL 20 and VanEck AEX UCITS 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 Global Correlations module to find global opportunities by holding instruments from different markets.