Correlation Between Multi Units and Lyxor Treasury

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

By analyzing existing cross correlation between Multi Units Luxembourg and Lyxor Treasury 3 7Y, you can compare the effects of market volatilities on Multi Units and Lyxor Treasury 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 Multi Units with a short position of Lyxor Treasury. Check out your portfolio center. Please also check ongoing floating volatility patterns of Multi Units and Lyxor Treasury.

Diversification Opportunities for Multi Units and Lyxor Treasury

0.9

Correlation Coefficient

Multi Units  Lyxor Treasury

Almost no diversification

The 3 months correlation between Multi and Lyxor is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Multi Units Luxembourg and Lyxor Treasury 3 7Y in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyxor Treasury 3 and Multi Units 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 Multi Units Luxembourg are associated (or correlated) with Lyxor Treasury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lyxor Treasury 3 has no effect on the direction of Multi Units i.e., Multi Units and Lyxor Treasury go up and down completely randomly.

Pair Corralation between Multi Units and Lyxor Treasury

Assuming the 90 days trading horizon Multi Units is expected to generate 2.15 times less return on investment than Lyxor Treasury. But when comparing it to its historical volatility, Multi Units Luxembourg is 5.8 times less risky than Lyxor Treasury. It trades about 0.44 of its potential returns per unit of risk. Lyxor Treasury 3 7Y is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,021  in Lyxor Treasury 3 7Y on December 25, 2024 and sell it today you would earn a total of  26.00  from holding Lyxor Treasury 3 7Y or generate 2.55% return on investment over 90 days.

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

Multi Units Luxembourg  vs.  Lyxor Treasury 3 7Y

Multi Units Luxembourg

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Multi Units Luxembourg are ranked lower than 34 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Multi Units is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Lyxor Treasury 3

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor Treasury 3 7Y are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Lyxor Treasury is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Multi Units and Lyxor Treasury

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

The idea behind Multi Units Luxembourg and Lyxor Treasury 3 7Y 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.