Correlation Between Lyxor 1 and Xtrackers MSCI

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

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

Diversification Opportunities for Lyxor 1 and Xtrackers MSCI

0.66

Correlation Coefficient

Lyxor 1  Xtrackers MSCI

Poor diversification

The 3 months correlation between Lyxor and Xtrackers is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor 1 and Xtrackers MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers MSCI 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 Xtrackers MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers MSCI has no effect on the direction of Lyxor 1 i.e., Lyxor 1 and Xtrackers MSCI go up and down completely randomly.

Pair Corralation between Lyxor 1 and Xtrackers MSCI

Assuming the 90 days trading horizon Lyxor 1 is expected to generate 3.68 times less return on investment than Xtrackers MSCI. In addition to that, Lyxor 1 is 1.05 times more volatile than Xtrackers MSCI. It trades about 0.01 of its total potential returns per unit of risk. Xtrackers MSCI is currently generating about 0.04 per unit of volatility. If you would invest  2,812  in Xtrackers MSCI on October 4, 2024 and sell it today you would earn a total of  462.00  from holding Xtrackers MSCI or generate 16.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.6%
Values	Daily Returns

Lyxor 1   vs.  Xtrackers MSCI

Lyxor 1

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor 1 are ranked lower than 3 (%) 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.

Xtrackers MSCI

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers MSCI are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Xtrackers MSCI is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Lyxor 1 and Xtrackers MSCI

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

The idea behind Lyxor 1 and Xtrackers MSCI 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.