Correlation Between Lyxor 1 and Japan Real

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

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

Diversification Opportunities for Lyxor 1 and Japan Real

0.53

Correlation Coefficient

Lyxor 1  Japan Real

Very weak diversification

The 3 months correlation between Lyxor and Japan is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor 1 and Japan Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Real Estate 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 Japan Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Real Estate has no effect on the direction of Lyxor 1 i.e., Lyxor 1 and Japan Real go up and down completely randomly.

Pair Corralation between Lyxor 1 and Japan Real

Assuming the 90 days trading horizon Lyxor 1 is expected to generate 0.74 times more return on investment than Japan Real. However, Lyxor 1 is 1.36 times less risky than Japan Real. It trades about 0.13 of its potential returns per unit of risk. Japan Real Estate is currently generating about 0.09 per unit of risk. If you would invest  2,481  in Lyxor 1 on December 29, 2024 and sell it today you would earn a total of  204.00  from holding Lyxor 1 or generate 8.22% return on investment over 90 days.

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

Lyxor 1   vs.  Japan Real Estate

Lyxor 1

Risk-Adjusted Performance

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 unsteady basic indicators, Lyxor 1 may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Japan Real Estate

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Japan Real Estate are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Japan Real may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Lyxor 1 and Japan Real

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

The idea behind Lyxor 1 and Japan Real Estate 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.