Correlation Between Lyxor 1 and Deka STOXX

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

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

Diversification Opportunities for Lyxor 1 and Deka STOXX

0.68

Correlation Coefficient

Lyxor 1  Deka STOXX

Poor diversification

The 3 months correlation between Lyxor and Deka is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor 1 and Deka STOXX Europe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deka STOXX Europe 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 Deka STOXX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deka STOXX Europe has no effect on the direction of Lyxor 1 i.e., Lyxor 1 and Deka STOXX go up and down completely randomly.

Pair Corralation between Lyxor 1 and Deka STOXX

Assuming the 90 days trading horizon Lyxor 1 is expected to generate 0.93 times more return on investment than Deka STOXX. However, Lyxor 1 is 1.08 times less risky than Deka STOXX. It trades about 0.33 of its potential returns per unit of risk. Deka STOXX Europe is currently generating about 0.27 per unit of risk. If you would invest  2,495  in Lyxor 1 on October 22, 2024 and sell it today you would earn a total of  111.00  from holding Lyxor 1 or generate 4.45% return on investment over 90 days.

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

Lyxor 1   vs.  Deka STOXX Europe

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.

Deka STOXX Europe

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Deka STOXX Europe are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Deka STOXX 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 Deka STOXX

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

The idea behind Lyxor 1 and Deka STOXX Europe 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 Anywhere module to track or share privately all of your investments from the convenience of any device.