Correlation Between Lyxor 1 and LG DAX

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

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

Diversification Opportunities for Lyxor 1 and LG DAX

-0.73

Correlation Coefficient

Lyxor 1  LG DAX

Pay attention - limited upside

The 3 months correlation between Lyxor and DES2 is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor 1 and LG DAX Daily in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG DAX Daily 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 LG DAX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG DAX Daily has no effect on the direction of Lyxor 1 i.e., Lyxor 1 and LG DAX go up and down completely randomly.

Pair Corralation between Lyxor 1 and LG DAX

Assuming the 90 days trading horizon Lyxor 1 is expected to generate 0.59 times more return on investment than LG DAX. However, Lyxor 1 is 1.69 times less risky than LG DAX. It trades about 0.02 of its potential returns per unit of risk. LG DAX Daily is currently generating about -0.06 per unit of risk. If you would invest  2,409  in Lyxor 1 on October 22, 2024 and sell it today you would earn a total of  197.00  from holding Lyxor 1 or generate 8.18% return on investment over 90 days.

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

Lyxor 1   vs.  LG DAX Daily

Lyxor 1

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor 1 are ranked lower than 9 (%) 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.

LG DAX Daily

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LG DAX Daily has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Etf's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the fund shareholders.

Pair Trading with Lyxor 1 and LG DAX

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

The idea behind Lyxor 1 and LG DAX Daily 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.