Correlation Between Lyxor 1 and Adidas AG

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

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

Diversification Opportunities for Lyxor 1 and Adidas AG

0.58

Correlation Coefficient

Lyxor 1  Adidas AG

Very weak diversification

The 3 months correlation between Lyxor and Adidas is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor 1 and adidas AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on adidas AG 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 Adidas AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of adidas AG has no effect on the direction of Lyxor 1 i.e., Lyxor 1 and Adidas AG go up and down completely randomly.

Pair Corralation between Lyxor 1 and Adidas AG

Assuming the 90 days trading horizon Lyxor 1 is expected to generate 2.69 times less return on investment than Adidas AG. But when comparing it to its historical volatility, Lyxor 1 is 2.3 times less risky than Adidas AG. It trades about 0.03 of its potential returns per unit of risk. adidas AG is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  23,250  in adidas AG on October 10, 2024 and sell it today you would earn a total of  650.00  from holding adidas AG or generate 2.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.31%
Values	Daily Returns

Lyxor 1   vs.  adidas AG

Lyxor 1

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor 1 are ranked lower than 2 (%) 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.

adidas AG

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in adidas AG are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Adidas AG is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Lyxor 1 and Adidas AG

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

The idea behind Lyxor 1 and adidas AG 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 Stocks Directory module to find actively traded stocks across global markets.