Correlation Between Lyxor Euro and Lyxor UCITS

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

By analyzing existing cross correlation between Lyxor Euro Government and Lyxor UCITS Stoxx, you can compare the effects of market volatilities on Lyxor Euro and Lyxor UCITS 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 Euro with a short position of Lyxor UCITS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lyxor Euro and Lyxor UCITS.

Diversification Opportunities for Lyxor Euro and Lyxor UCITS

0.18

Correlation Coefficient

Lyxor Euro  Lyxor UCITS

Average diversification

The 3 months correlation between Lyxor and Lyxor is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor Euro Government and Lyxor UCITS Stoxx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyxor UCITS Stoxx and Lyxor Euro 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 Euro Government are associated (or correlated) with Lyxor UCITS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lyxor UCITS Stoxx has no effect on the direction of Lyxor Euro i.e., Lyxor Euro and Lyxor UCITS go up and down completely randomly.

Pair Corralation between Lyxor Euro and Lyxor UCITS

Assuming the 90 days trading horizon Lyxor Euro Government is expected to under-perform the Lyxor UCITS. But the etf apears to be less risky and, when comparing its historical volatility, Lyxor Euro Government is 2.08 times less risky than Lyxor UCITS. The etf trades about -0.1 of its potential returns per unit of risk. The Lyxor UCITS Stoxx is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  5,306  in Lyxor UCITS Stoxx on December 27, 2024 and sell it today you would earn a total of  585.00  from holding Lyxor UCITS Stoxx or generate 11.03% return on investment over 90 days.

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

Lyxor Euro Government  vs.  Lyxor UCITS Stoxx

Lyxor Euro Government

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lyxor Euro Government has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Lyxor Euro is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Lyxor UCITS Stoxx

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor UCITS Stoxx are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal technical and fundamental indicators, Lyxor UCITS may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Lyxor Euro and Lyxor UCITS

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

The idea behind Lyxor Euro Government and Lyxor UCITS Stoxx 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.