Correlation Between Lyxor 1 and TOHOKU EL

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

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

Diversification Opportunities for Lyxor 1 and TOHOKU EL

-0.45

Correlation Coefficient

Lyxor 1  TOHOKU EL

Very good diversification

The 3 months correlation between Lyxor and TOHOKU is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor 1 and TOHOKU EL PWR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TOHOKU EL PWR 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 TOHOKU EL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TOHOKU EL PWR has no effect on the direction of Lyxor 1 i.e., Lyxor 1 and TOHOKU EL go up and down completely randomly.

Pair Corralation between Lyxor 1 and TOHOKU EL

Assuming the 90 days trading horizon Lyxor 1 is expected to generate 0.31 times more return on investment than TOHOKU EL. However, Lyxor 1 is 3.22 times less risky than TOHOKU EL. It trades about 0.26 of its potential returns per unit of risk. TOHOKU EL PWR is currently generating about 0.01 per unit of risk. If you would invest  2,485  in Lyxor 1 on October 21, 2024 and sell it today you would earn a total of  94.00  from holding Lyxor 1 or generate 3.78% return on investment over 90 days.

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

Lyxor 1   vs.  TOHOKU EL PWR

Lyxor 1

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor 1 are ranked lower than 6 (%) 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.

TOHOKU EL PWR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TOHOKU EL PWR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Lyxor 1 and TOHOKU EL

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

The idea behind Lyxor 1 and TOHOKU EL PWR 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 Commodity Directory module to find actively traded commodities issued by global exchanges.