Correlation Between Lyxor 1 and Invesco Euro

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

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

Diversification Opportunities for Lyxor 1 and Invesco Euro

0.42

Correlation Coefficient

Lyxor 1  Invesco Euro

Very weak diversification

The 3 months correlation between Lyxor and Invesco is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor 1 and Invesco Euro Corporate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Euro Corporate 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 Invesco Euro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Euro Corporate has no effect on the direction of Lyxor 1 i.e., Lyxor 1 and Invesco Euro go up and down completely randomly.

Pair Corralation between Lyxor 1 and Invesco Euro

Assuming the 90 days trading horizon Lyxor 1 is expected to generate 3.64 times more return on investment than Invesco Euro. However, Lyxor 1 is 3.64 times more volatile than Invesco Euro Corporate. It trades about 0.12 of its potential returns per unit of risk. Invesco Euro Corporate is currently generating about 0.01 per unit of risk. If you would invest  2,473  in Lyxor 1 on October 23, 2024 and sell it today you would earn a total of  142.00  from holding Lyxor 1 or generate 5.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.31%
Values	Daily Returns

Lyxor 1   vs.  Invesco Euro Corporate

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.

Invesco Euro Corporate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Euro Corporate has generated negative risk-adjusted returns adding no value to fund investors. In spite of rather sound technical and fundamental indicators, Invesco Euro is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Lyxor 1 and Invesco Euro

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

The idea behind Lyxor 1 and Invesco Euro Corporate 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.