Correlation Between Lyxor Fed and Lyxor BofAML

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

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

Diversification Opportunities for Lyxor Fed and Lyxor BofAML

0.43

Correlation Coefficient

Lyxor Fed  Lyxor BofAML

Very weak diversification

The 3 months correlation between Lyxor and Lyxor is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor Fed Funds and Lyxor BofAML USD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyxor BofAML USD and Lyxor Fed 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 Fed Funds are associated (or correlated) with Lyxor BofAML. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lyxor BofAML USD has no effect on the direction of Lyxor Fed i.e., Lyxor Fed and Lyxor BofAML go up and down completely randomly.

Pair Corralation between Lyxor Fed and Lyxor BofAML

Assuming the 90 days trading horizon Lyxor Fed Funds is expected to generate 1.48 times more return on investment than Lyxor BofAML. However, Lyxor Fed is 1.48 times more volatile than Lyxor BofAML USD. It trades about 0.03 of its potential returns per unit of risk. Lyxor BofAML USD is currently generating about -0.05 per unit of risk. If you would invest  9,696  in Lyxor Fed Funds on September 13, 2024 and sell it today you would earn a total of  122.00  from holding Lyxor Fed Funds or generate 1.26% return on investment over 90 days.

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

Lyxor Fed Funds  vs.  Lyxor BofAML USD

Lyxor Fed Funds

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor Fed Funds are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Lyxor Fed is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Lyxor BofAML USD

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Lyxor BofAML USD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Lyxor BofAML is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Lyxor Fed and Lyxor BofAML

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

The idea behind Lyxor Fed Funds and Lyxor BofAML USD 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.