Correlation Between Lyxor 1 and Reliance Industries

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

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

Diversification Opportunities for Lyxor 1 and Reliance Industries

-0.12

Correlation Coefficient

Lyxor 1  Reliance Industries

Good diversification

The 3 months correlation between Lyxor and Reliance is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor 1 and Reliance Industries Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reliance Industries 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 Reliance Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reliance Industries has no effect on the direction of Lyxor 1 i.e., Lyxor 1 and Reliance Industries go up and down completely randomly.

Pair Corralation between Lyxor 1 and Reliance Industries

Assuming the 90 days trading horizon Lyxor 1 is expected to generate 0.5 times more return on investment than Reliance Industries. However, Lyxor 1 is 2.01 times less risky than Reliance Industries. It trades about 0.06 of its potential returns per unit of risk. Reliance Industries Limited is currently generating about -0.04 per unit of risk. If you would invest  2,424  in Lyxor 1 on October 7, 2024 and sell it today you would earn a total of  60.00  from holding Lyxor 1 or generate 2.48% return on investment over 90 days.

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

Lyxor 1   vs.  Reliance Industries Limited

Lyxor 1

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor 1 are ranked lower than 4 (%) 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.

Reliance Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reliance Industries Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Reliance Industries is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Lyxor 1 and Reliance Industries

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

The idea behind Lyxor 1 and Reliance Industries Limited 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.