Correlation Between Lyxor 1 and ACE HARDWARE

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

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

Diversification Opportunities for Lyxor 1 and ACE HARDWARE

-0.17

Correlation Coefficient

Lyxor 1  ACE HARDWARE

Good diversification

The 3 months correlation between Lyxor and ACE is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor 1 and ACE HARDWARE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ACE HARDWARE 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 ACE HARDWARE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ACE HARDWARE has no effect on the direction of Lyxor 1 i.e., Lyxor 1 and ACE HARDWARE go up and down completely randomly.

Pair Corralation between Lyxor 1 and ACE HARDWARE

Assuming the 90 days trading horizon Lyxor 1 is expected to generate 0.18 times more return on investment than ACE HARDWARE. However, Lyxor 1 is 5.42 times less risky than ACE HARDWARE. It trades about 0.06 of its potential returns per unit of risk. ACE HARDWARE is currently generating about -0.03 per unit of risk. If you would invest  2,421  in Lyxor 1 on October 8, 2024 and sell it today you would earn a total of  63.00  from holding Lyxor 1 or generate 2.6% 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.  ACE HARDWARE

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.

ACE HARDWARE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ACE HARDWARE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Lyxor 1 and ACE HARDWARE

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

The idea behind Lyxor 1 and ACE HARDWARE 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.