Correlation Between Lyxor CAC and SPDR MSCI

Can any of the company-specific risk be diversified away by investing in both Lyxor CAC and SPDR MSCI 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 SPDR MSCI 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 SPDR MSCI Europe, you can compare the effects of market volatilities on Lyxor CAC and SPDR MSCI 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 SPDR MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lyxor CAC and SPDR MSCI.

Diversification Opportunities for Lyxor CAC and SPDR MSCI

0.73

Correlation Coefficient

Lyxor CAC  SPDR MSCI

Poor diversification

The 3 months correlation between Lyxor and SPDR is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor CAC 40 and SPDR MSCI Europe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR MSCI Europe 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 SPDR MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR MSCI Europe has no effect on the direction of Lyxor CAC i.e., Lyxor CAC and SPDR MSCI go up and down completely randomly.

Pair Corralation between Lyxor CAC and SPDR MSCI

Assuming the 90 days trading horizon Lyxor CAC 40 is expected to under-perform the SPDR MSCI. But the etf apears to be less risky and, when comparing its historical volatility, Lyxor CAC 40 is 1.75 times less risky than SPDR MSCI. The etf trades about -0.05 of its potential returns per unit of risk. The SPDR MSCI Europe is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  12,972  in SPDR MSCI Europe on September 4, 2024 and sell it today you would earn a total of  2.00  from holding SPDR MSCI Europe or generate 0.02% return on investment over 90 days.

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

Lyxor CAC 40  vs.  SPDR MSCI Europe

Lyxor CAC 40

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lyxor CAC 40 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Lyxor CAC is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

SPDR MSCI Europe

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR MSCI Europe has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward-looking signals, SPDR MSCI is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lyxor CAC and SPDR MSCI

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

The idea behind Lyxor CAC 40 and SPDR MSCI Europe 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.