Correlation Between Lyxor Index and Lyxor Treasury

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

By analyzing existing cross correlation between Lyxor Index Fund and Lyxor Treasury 10Y, you can compare the effects of market volatilities on Lyxor Index and Lyxor Treasury 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 Index with a short position of Lyxor Treasury. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lyxor Index and Lyxor Treasury.

Diversification Opportunities for Lyxor Index and Lyxor Treasury

0.68

Correlation Coefficient

Lyxor Index  Lyxor Treasury

Poor diversification

The 3 months correlation between Lyxor and Lyxor is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor Index Fund and Lyxor Treasury 10Y in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyxor Treasury 10Y and Lyxor Index 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 Index Fund are associated (or correlated) with Lyxor Treasury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lyxor Treasury 10Y has no effect on the direction of Lyxor Index i.e., Lyxor Index and Lyxor Treasury go up and down completely randomly.

Pair Corralation between Lyxor Index and Lyxor Treasury

Assuming the 90 days trading horizon Lyxor Index Fund is expected to generate 0.51 times more return on investment than Lyxor Treasury. However, Lyxor Index Fund is 1.95 times less risky than Lyxor Treasury. It trades about -0.15 of its potential returns per unit of risk. Lyxor Treasury 10Y is currently generating about -0.26 per unit of risk. If you would invest  8,701  in Lyxor Index Fund on September 27, 2024 and sell it today you would lose (103.00) from holding Lyxor Index Fund or give up 1.18% of portfolio value over 90 days.

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

Lyxor Index Fund  vs.  Lyxor Treasury 10Y

Lyxor Index Fund

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lyxor Index Fund has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Lyxor Treasury 10Y

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lyxor Treasury 10Y has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Pair Trading with Lyxor Index and Lyxor Treasury

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

The idea behind Lyxor Index Fund and Lyxor Treasury 10Y 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.