Correlation Between Lyxor 1 and VanEck Vectors

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

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

Diversification Opportunities for Lyxor 1 and VanEck Vectors

0.67

Correlation Coefficient

Lyxor 1  VanEck Vectors

Poor diversification

The 3 months correlation between Lyxor and VanEck is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor 1 and VanEck Vectors UCITS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Vectors UCITS 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 VanEck Vectors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Vectors UCITS has no effect on the direction of Lyxor 1 i.e., Lyxor 1 and VanEck Vectors go up and down completely randomly.

Pair Corralation between Lyxor 1 and VanEck Vectors

Assuming the 90 days trading horizon Lyxor 1 is expected to generate 1.23 times less return on investment than VanEck Vectors. In addition to that, Lyxor 1 is 1.58 times more volatile than VanEck Vectors UCITS. It trades about 0.04 of its total potential returns per unit of risk. VanEck Vectors UCITS is currently generating about 0.07 per unit of volatility. If you would invest  9,568  in VanEck Vectors UCITS on September 18, 2024 and sell it today you would earn a total of  2,265  from holding VanEck Vectors UCITS or generate 23.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Lyxor 1   vs.  VanEck Vectors UCITS

Lyxor 1

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor 1 are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Lyxor 1 may actually be approaching a critical reversion point that can send shares even higher in January 2025.

VanEck Vectors UCITS

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Vectors UCITS are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, VanEck Vectors may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Lyxor 1 and VanEck Vectors

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

The idea behind Lyxor 1 and VanEck Vectors UCITS 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.