Correlation Between Invesco EQQQ and Lyxor PEA

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

By analyzing existing cross correlation between Invesco EQQQ NASDAQ 100 and Lyxor PEA Nasdaq, you can compare the effects of market volatilities on Invesco EQQQ and Lyxor PEA 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 Invesco EQQQ with a short position of Lyxor PEA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco EQQQ and Lyxor PEA.

Diversification Opportunities for Invesco EQQQ and Lyxor PEA

1.0

Correlation Coefficient

Invesco EQQQ  Lyxor PEA

No risk reduction

The 3 months correlation between Invesco and Lyxor is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Invesco EQQQ NASDAQ 100 and Lyxor PEA Nasdaq in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyxor PEA Nasdaq and Invesco EQQQ 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 Invesco EQQQ NASDAQ 100 are associated (or correlated) with Lyxor PEA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lyxor PEA Nasdaq has no effect on the direction of Invesco EQQQ i.e., Invesco EQQQ and Lyxor PEA go up and down completely randomly.

Pair Corralation between Invesco EQQQ and Lyxor PEA

Assuming the 90 days trading horizon Invesco EQQQ NASDAQ 100 is expected to generate 1.02 times more return on investment than Lyxor PEA. However, Invesco EQQQ is 1.02 times more volatile than Lyxor PEA Nasdaq. It trades about -0.1 of its potential returns per unit of risk. Lyxor PEA Nasdaq is currently generating about -0.12 per unit of risk. If you would invest  50,510  in Invesco EQQQ NASDAQ 100 on October 14, 2024 and sell it today you would lose (860.00) from holding Invesco EQQQ NASDAQ 100 or give up 1.7% of portfolio value over 90 days.

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

Invesco EQQQ NASDAQ 100  vs.  Lyxor PEA Nasdaq

Invesco EQQQ NASDAQ

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco EQQQ NASDAQ 100 are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Invesco EQQQ may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Lyxor PEA Nasdaq

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with Invesco EQQQ and Lyxor PEA

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

The idea behind Invesco EQQQ NASDAQ 100 and Lyxor PEA Nasdaq 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.