Correlation Between IShares II and Lyxor BEL

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

By analyzing existing cross correlation between iShares II Public and Lyxor BEL 20, you can compare the effects of market volatilities on IShares II and Lyxor BEL 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 IShares II with a short position of Lyxor BEL. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares II and Lyxor BEL.

Diversification Opportunities for IShares II and Lyxor BEL

0.69

Correlation Coefficient

IShares II  Lyxor BEL

Poor diversification

The 3 months correlation between IShares and Lyxor is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding iShares II Public and Lyxor BEL 20 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyxor BEL 20 and IShares II 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 iShares II Public are associated (or correlated) with Lyxor BEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lyxor BEL 20 has no effect on the direction of IShares II i.e., IShares II and Lyxor BEL go up and down completely randomly.

Pair Corralation between IShares II and Lyxor BEL

Assuming the 90 days trading horizon iShares II Public is expected to under-perform the Lyxor BEL. In addition to that, IShares II is 1.37 times more volatile than Lyxor BEL 20. It trades about -0.03 of its total potential returns per unit of risk. Lyxor BEL 20 is currently generating about 0.04 per unit of volatility. If you would invest  6,181  in Lyxor BEL 20 on September 3, 2024 and sell it today you would earn a total of  110.00  from holding Lyxor BEL 20 or generate 1.78% return on investment over 90 days.

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

iShares II Public  vs.  Lyxor BEL 20

iShares II Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares II Public has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, IShares II is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Lyxor BEL 20

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor BEL 20 are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable essential indicators, Lyxor BEL is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with IShares II and Lyxor BEL

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

The idea behind iShares II Public and Lyxor BEL 20 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 Commodity Directory module to find actively traded commodities issued by global exchanges.