Correlation Between Lyxor 1 and FORSEE POWEREO

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

By analyzing existing cross correlation between Lyxor 1 and FORSEE POWEREO 10, you can compare the effects of market volatilities on Lyxor 1 and FORSEE POWEREO 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 FORSEE POWEREO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lyxor 1 and FORSEE POWEREO.

Diversification Opportunities for Lyxor 1 and FORSEE POWEREO

-0.54

Correlation Coefficient

Lyxor 1  FORSEE POWEREO

Excellent diversification

The 3 months correlation between Lyxor and FORSEE is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor 1 and FORSEE POWEREO 10 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FORSEE POWEREO 10 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 FORSEE POWEREO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FORSEE POWEREO 10 has no effect on the direction of Lyxor 1 i.e., Lyxor 1 and FORSEE POWEREO go up and down completely randomly.

Pair Corralation between Lyxor 1 and FORSEE POWEREO

Assuming the 90 days trading horizon Lyxor 1 is expected to generate 1.77 times less return on investment than FORSEE POWEREO. But when comparing it to its historical volatility, Lyxor 1 is 7.23 times less risky than FORSEE POWEREO. It trades about 0.14 of its potential returns per unit of risk. FORSEE POWEREO 10 is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  65.00  in FORSEE POWEREO 10 on October 26, 2024 and sell it today you would earn a total of  1.00  from holding FORSEE POWEREO 10 or generate 1.54% return on investment over 90 days.

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

Lyxor 1   vs.  FORSEE POWEREO 10

Lyxor 1

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor 1 are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Lyxor 1 may actually be approaching a critical reversion point that can send shares even higher in February 2025.

FORSEE POWEREO 10

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FORSEE POWEREO 10 are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, FORSEE POWEREO reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lyxor 1 and FORSEE POWEREO

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

The idea behind Lyxor 1 and FORSEE POWEREO 10 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.