Correlation Between IShares NASDAQ and Lyxor UCITS

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

By analyzing existing cross correlation between iShares NASDAQ 100 and Lyxor UCITS Stoxx, you can compare the effects of market volatilities on IShares NASDAQ and Lyxor UCITS 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 IShares NASDAQ with a short position of Lyxor UCITS. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares NASDAQ and Lyxor UCITS.

Diversification Opportunities for IShares NASDAQ and Lyxor UCITS

-0.12

Correlation Coefficient

IShares NASDAQ  Lyxor UCITS

Good diversification

The 3 months correlation between IShares and Lyxor is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding iShares NASDAQ 100 and Lyxor UCITS Stoxx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyxor UCITS Stoxx and IShares NASDAQ 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 iShares NASDAQ 100 are associated (or correlated) with Lyxor UCITS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lyxor UCITS Stoxx has no effect on the direction of IShares NASDAQ i.e., IShares NASDAQ and Lyxor UCITS go up and down completely randomly.

Pair Corralation between IShares NASDAQ and Lyxor UCITS

Assuming the 90 days trading horizon iShares NASDAQ 100 is expected to generate 1.17 times more return on investment than Lyxor UCITS. However, IShares NASDAQ is 1.17 times more volatile than Lyxor UCITS Stoxx. It trades about 0.12 of its potential returns per unit of risk. Lyxor UCITS Stoxx is currently generating about -0.05 per unit of risk. If you would invest  114,300  in iShares NASDAQ 100 on September 30, 2024 and sell it today you would earn a total of  8,260  from holding iShares NASDAQ 100 or generate 7.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

iShares NASDAQ 100  vs.  Lyxor UCITS Stoxx

iShares NASDAQ 100

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares NASDAQ 100 are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, IShares NASDAQ may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Lyxor UCITS Stoxx

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lyxor UCITS Stoxx has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, Lyxor UCITS is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with IShares NASDAQ and Lyxor UCITS

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

The idea behind iShares NASDAQ 100 and Lyxor UCITS Stoxx 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.