Correlation Between Lyxor 1 and Hafnia

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

By analyzing existing cross correlation between Lyxor 1 and Hafnia Limited, you can compare the effects of market volatilities on Lyxor 1 and Hafnia 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 Hafnia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lyxor 1 and Hafnia.

Diversification Opportunities for Lyxor 1 and Hafnia

-0.45

Correlation Coefficient

Lyxor 1  Hafnia

Very good diversification

The 3 months correlation between Lyxor and Hafnia is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor 1 and Hafnia Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hafnia Limited 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 Hafnia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hafnia Limited has no effect on the direction of Lyxor 1 i.e., Lyxor 1 and Hafnia go up and down completely randomly.

Pair Corralation between Lyxor 1 and Hafnia

Assuming the 90 days trading horizon Lyxor 1 is expected to generate 14.55 times less return on investment than Hafnia. But when comparing it to its historical volatility, Lyxor 1 is 2.85 times less risky than Hafnia. It trades about 0.01 of its potential returns per unit of risk. Hafnia Limited is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  311.00  in Hafnia Limited on October 5, 2024 and sell it today you would earn a total of  187.00  from holding Hafnia Limited or generate 60.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	97.4%
Values	Daily Returns

Lyxor 1   vs.  Hafnia Limited

Lyxor 1

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Lyxor 1 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Lyxor 1 is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Hafnia Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hafnia Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Lyxor 1 and Hafnia

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

The idea behind Lyxor 1 and Hafnia Limited 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.