Correlation Between Lyxor Core and Lyxor MSCI

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

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

Diversification Opportunities for Lyxor Core and Lyxor MSCI

0.45

Correlation Coefficient

Lyxor Core  Lyxor MSCI

Very weak diversification

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

Pair Corralation between Lyxor Core and Lyxor MSCI

Assuming the 90 days trading horizon Lyxor Core UK is expected to generate 0.36 times more return on investment than Lyxor MSCI. However, Lyxor Core UK is 2.77 times less risky than Lyxor MSCI. It trades about -0.02 of its potential returns per unit of risk. Lyxor MSCI World is currently generating about -0.11 per unit of risk. If you would invest  1,332,200  in Lyxor Core UK on December 30, 2024 and sell it today you would lose (14,000) from holding Lyxor Core UK or give up 1.05% of portfolio value over 90 days.

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

Lyxor Core UK  vs.  Lyxor MSCI World

Lyxor Core UK

Risk-Adjusted Performance

Very Weak

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

Lyxor MSCI World

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lyxor MSCI World has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Etf's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

Pair Trading with Lyxor Core and Lyxor MSCI

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

The idea behind Lyxor Core UK and Lyxor MSCI World 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.