Correlation Between Lyxor 1 and Pareto Nordic

Can any of the company-specific risk be diversified away by investing in both Lyxor 1 and Pareto Nordic 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 1 and Pareto Nordic into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lyxor 1 and Pareto Nordic Equity, you can compare the effects of market volatilities on Lyxor 1 and Pareto Nordic 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 1 with a short position of Pareto Nordic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lyxor 1 and Pareto Nordic.

Diversification Opportunities for Lyxor 1 and Pareto Nordic

-0.04

Correlation Coefficient

Lyxor 1  Pareto Nordic

Good diversification

The 3 months correlation between Lyxor and Pareto is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor 1 and Pareto Nordic Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pareto Nordic Equity and Lyxor 1 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 1 are associated (or correlated) with Pareto Nordic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pareto Nordic Equity has no effect on the direction of Lyxor 1 i.e., Lyxor 1 and Pareto Nordic go up and down completely randomly.

Pair Corralation between Lyxor 1 and Pareto Nordic

Assuming the 90 days trading horizon Lyxor 1 is expected to generate 6.23 times less return on investment than Pareto Nordic. In addition to that, Lyxor 1 is 1.18 times more volatile than Pareto Nordic Equity. It trades about 0.01 of its total potential returns per unit of risk. Pareto Nordic Equity is currently generating about 0.07 per unit of volatility. If you would invest  13,099  in Pareto Nordic Equity on October 2, 2024 and sell it today you would earn a total of  1,707  from holding Pareto Nordic Equity or generate 13.03% return on investment over 90 days.

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

Lyxor 1   vs.  Pareto Nordic Equity

Lyxor 1

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor 1 are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Lyxor 1 is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pareto Nordic Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pareto Nordic Equity has generated negative risk-adjusted returns adding no value to fund investors. Despite latest weak performance, the Fund's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the mutual fund stockholders.

Pair Trading with Lyxor 1 and Pareto Nordic

The main advantage of trading using opposite Lyxor 1 and Pareto Nordic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lyxor 1 position performs unexpectedly, Pareto Nordic 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 Pareto Nordic will offset losses from the drop in Pareto Nordic's long position.

The idea behind Lyxor 1 and Pareto Nordic Equity 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.