Correlation Between Lyxor 1 and Broadridge Financial

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

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

Diversification Opportunities for Lyxor 1 and Broadridge Financial

0.65

Correlation Coefficient

Lyxor 1  Broadridge Financial

Poor diversification

The 3 months correlation between Lyxor and Broadridge is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor 1 and Broadridge Financial Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Broadridge Financial 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 Broadridge Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Broadridge Financial has no effect on the direction of Lyxor 1 i.e., Lyxor 1 and Broadridge Financial go up and down completely randomly.

Pair Corralation between Lyxor 1 and Broadridge Financial

Assuming the 90 days trading horizon Lyxor 1 is expected to generate 2.04 times less return on investment than Broadridge Financial. But when comparing it to its historical volatility, Lyxor 1 is 1.47 times less risky than Broadridge Financial. It trades about 0.14 of its potential returns per unit of risk. Broadridge Financial Solutions is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  18,900  in Broadridge Financial Solutions on September 13, 2024 and sell it today you would earn a total of  3,100  from holding Broadridge Financial Solutions or generate 16.4% 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.  Broadridge Financial Solutions

Lyxor 1

Risk-Adjusted Performance

10 of 100

OK

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 January 2025.

Broadridge Financial

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Broadridge Financial Solutions are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Broadridge Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lyxor 1 and Broadridge Financial

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

The idea behind Lyxor 1 and Broadridge Financial Solutions 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.