Correlation Between Lyxor UCITS and UST Inc

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

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

Diversification Opportunities for Lyxor UCITS and UST Inc

0.33

Correlation Coefficient

Lyxor UCITS  UST Inc

Weak diversification

The 3 months correlation between Lyxor and UST is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor UCITS Dow and Multi Units Luxembourg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multi Units Luxembourg and Lyxor UCITS 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 UCITS Dow are associated (or correlated) with UST Inc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multi Units Luxembourg has no effect on the direction of Lyxor UCITS i.e., Lyxor UCITS and UST Inc go up and down completely randomly.

Pair Corralation between Lyxor UCITS and UST Inc

Assuming the 90 days trading horizon Lyxor UCITS is expected to generate 1.42 times less return on investment than UST Inc. But when comparing it to its historical volatility, Lyxor UCITS Dow is 1.46 times less risky than UST Inc. It trades about 0.12 of its potential returns per unit of risk. Multi Units Luxembourg is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  5,566  in Multi Units Luxembourg on November 20, 2024 and sell it today you would earn a total of  2,990  from holding Multi Units Luxembourg or generate 53.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.74%
Values	Daily Returns

Lyxor UCITS Dow  vs.  Multi Units Luxembourg

Lyxor UCITS Dow

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor UCITS Dow are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Lyxor UCITS is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Multi Units Luxembourg

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Multi Units Luxembourg are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, UST Inc may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Lyxor UCITS and UST Inc

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

The idea behind Lyxor UCITS Dow and Multi Units Luxembourg 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.