Correlation Between Multi Units and Lyxor UCITS

Can any of the company-specific risk be diversified away by investing in both Multi Units 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 Multi Units and Lyxor UCITS 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 UCITS Dow, you can compare the effects of market volatilities on Multi Units 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 Multi Units with a short position of Lyxor UCITS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Multi Units and Lyxor UCITS.

Diversification Opportunities for Multi Units and Lyxor UCITS

0.61

Correlation Coefficient

Multi Units  Lyxor UCITS

Poor diversification

The 3 months correlation between Multi and Lyxor is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Multi Units Luxembourg and Lyxor UCITS Dow in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyxor UCITS Dow 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 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 Dow has no effect on the direction of Multi Units i.e., Multi Units and Lyxor UCITS go up and down completely randomly.

Pair Corralation between Multi Units and Lyxor UCITS

Assuming the 90 days trading horizon Multi Units is expected to generate 2.97 times less return on investment than Lyxor UCITS. But when comparing it to its historical volatility, Multi Units Luxembourg is 1.15 times less risky than Lyxor UCITS. It trades about 0.09 of its potential returns per unit of risk. Lyxor UCITS Dow is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  37,755  in Lyxor UCITS Dow on September 3, 2024 and sell it today you would earn a total of  5,565  from holding Lyxor UCITS Dow or generate 14.74% return on investment over 90 days.

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

Multi Units Luxembourg  vs.  Lyxor UCITS Dow

Multi Units Luxembourg

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Multi Units Luxembourg are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Multi Units is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Lyxor UCITS Dow

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor UCITS Dow are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Lyxor UCITS sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Multi Units and Lyxor UCITS

The main advantage of trading using opposite Multi Units and Lyxor UCITS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Multi Units 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 Multi Units Luxembourg and Lyxor UCITS Dow 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.