Correlation Between Lyxor 1 and PROSUS NV

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

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

Diversification Opportunities for Lyxor 1 and PROSUS NV

0.64

Correlation Coefficient

Lyxor 1  PROSUS NV

Poor diversification

The 3 months correlation between Lyxor and PROSUS is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor 1 and PROSUS NV ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PROSUS NV ADR 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 PROSUS NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PROSUS NV ADR has no effect on the direction of Lyxor 1 i.e., Lyxor 1 and PROSUS NV go up and down completely randomly.

Pair Corralation between Lyxor 1 and PROSUS NV

Assuming the 90 days trading horizon Lyxor 1 is expected to generate 3.93 times less return on investment than PROSUS NV. But when comparing it to its historical volatility, Lyxor 1 is 2.37 times less risky than PROSUS NV. It trades about 0.06 of its potential returns per unit of risk. PROSUS NV ADR is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  654.00  in PROSUS NV ADR on September 3, 2024 and sell it today you would earn a total of  91.00  from holding PROSUS NV ADR or generate 13.91% return on investment over 90 days.

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

Lyxor 1   vs.  PROSUS NV ADR

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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

PROSUS NV ADR

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PROSUS NV ADR are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PROSUS NV reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lyxor 1 and PROSUS NV

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

The idea behind Lyxor 1 and PROSUS NV ADR 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.