Correlation Between Lyxor 1 and DAI NIPPON

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

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

Diversification Opportunities for Lyxor 1 and DAI NIPPON

0.09

Correlation Coefficient

Lyxor 1  DAI NIPPON

Significant diversification

The 3 months correlation between Lyxor and DAI is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor 1 and DAI NIPPON PRINTING in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DAI NIPPON PRINTING 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 DAI NIPPON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DAI NIPPON PRINTING has no effect on the direction of Lyxor 1 i.e., Lyxor 1 and DAI NIPPON go up and down completely randomly.

Pair Corralation between Lyxor 1 and DAI NIPPON

Assuming the 90 days trading horizon Lyxor 1 is expected to generate 0.77 times more return on investment than DAI NIPPON. However, Lyxor 1 is 1.29 times less risky than DAI NIPPON. It trades about 0.21 of its potential returns per unit of risk. DAI NIPPON PRINTING is currently generating about 0.0 per unit of risk. If you would invest  2,485  in Lyxor 1 on December 20, 2024 and sell it today you would earn a total of  311.00  from holding Lyxor 1 or generate 12.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Lyxor 1   vs.  DAI NIPPON PRINTING

Lyxor 1

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor 1 are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Lyxor 1 reported solid returns over the last few months and may actually be approaching a breakup point.

DAI NIPPON PRINTING

Risk-Adjusted Performance

Very Weak

Over the last 90 days DAI NIPPON PRINTING has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, DAI NIPPON is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Lyxor 1 and DAI NIPPON

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

The idea behind Lyxor 1 and DAI NIPPON PRINTING 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.