Correlation Between Lyxor CAC and BNPP LC

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

By analyzing existing cross correlation between Lyxor CAC 40 and BNPP LC EURPAB, you can compare the effects of market volatilities on Lyxor CAC and BNPP LC 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 CAC with a short position of BNPP LC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lyxor CAC and BNPP LC.

Diversification Opportunities for Lyxor CAC and BNPP LC

0.99

Correlation Coefficient

Lyxor CAC  BNPP LC

No risk reduction

The 3 months correlation between Lyxor and BNPP is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor CAC 40 and BNPP LC EURPAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BNPP LC EURPAB and Lyxor CAC 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 CAC 40 are associated (or correlated) with BNPP LC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BNPP LC EURPAB has no effect on the direction of Lyxor CAC i.e., Lyxor CAC and BNPP LC go up and down completely randomly.

Pair Corralation between Lyxor CAC and BNPP LC

Assuming the 90 days trading horizon Lyxor CAC 40 is expected to generate 0.95 times more return on investment than BNPP LC. However, Lyxor CAC 40 is 1.06 times less risky than BNPP LC. It trades about 0.18 of its potential returns per unit of risk. BNPP LC EURPAB is currently generating about 0.15 per unit of risk. If you would invest  3,498  in Lyxor CAC 40 on December 22, 2024 and sell it today you would earn a total of  359.00  from holding Lyxor CAC 40 or generate 10.26% return on investment over 90 days.

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

Lyxor CAC 40  vs.  BNPP LC EURPAB

Lyxor CAC 40

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor CAC 40 are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lyxor CAC may actually be approaching a critical reversion point that can send shares even higher in April 2025.

BNPP LC EURPAB

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BNPP LC EURPAB are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, BNPP LC may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Lyxor CAC and BNPP LC

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

The idea behind Lyxor CAC 40 and BNPP LC EURPAB 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.