Correlation Between Lyxor 1 and Metro AG

Can any of the company-specific risk be diversified away by investing in both Lyxor 1 and Metro 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 Metro 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 Metro AG, you can compare the effects of market volatilities on Lyxor 1 and Metro 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 Metro AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lyxor 1 and Metro AG.

Diversification Opportunities for Lyxor 1 and Metro AG

0.82

Correlation Coefficient

Lyxor 1  Metro AG

Very poor diversification

The 3 months correlation between Lyxor and Metro is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor 1 and Metro AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metro 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 Metro AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metro AG has no effect on the direction of Lyxor 1 i.e., Lyxor 1 and Metro AG go up and down completely randomly.

Pair Corralation between Lyxor 1 and Metro AG

Assuming the 90 days trading horizon Lyxor 1 is expected to generate 3.18 times less return on investment than Metro AG. But when comparing it to its historical volatility, Lyxor 1 is 4.76 times less risky than Metro AG. It trades about 0.2 of its potential returns per unit of risk. Metro AG is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  391.00  in Metro AG on December 21, 2024 and sell it today you would earn a total of  146.00  from holding Metro AG or generate 37.34% return on investment over 90 days.

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

Lyxor 1   vs.  Metro AG

Lyxor 1

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor 1 are ranked lower than 15 (%) 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 April 2025.

Metro AG

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Metro AG are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile fundamental drivers, Metro AG displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lyxor 1 and Metro AG

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

The idea behind Lyxor 1 and Metro 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.