Correlation Between SPDR Dow and Lyxor MSCI

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

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

Diversification Opportunities for SPDR Dow and Lyxor MSCI

0.33

Correlation Coefficient

SPDR Dow  Lyxor MSCI

Weak diversification

The 3 months correlation between SPDR and Lyxor is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Dow Jones and Lyxor MSCI Brazil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyxor MSCI Brazil and SPDR Dow 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 SPDR Dow Jones 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 Brazil has no effect on the direction of SPDR Dow i.e., SPDR Dow and Lyxor MSCI go up and down completely randomly.

Pair Corralation between SPDR Dow and Lyxor MSCI

Assuming the 90 days trading horizon SPDR Dow Jones is expected to under-perform the Lyxor MSCI. But the etf apears to be less risky and, when comparing its historical volatility, SPDR Dow Jones is 1.89 times less risky than Lyxor MSCI. The etf trades about 0.0 of its potential returns per unit of risk. The Lyxor MSCI Brazil is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  1,714  in Lyxor MSCI Brazil on December 30, 2024 and sell it today you would earn a total of  300.00  from holding Lyxor MSCI Brazil or generate 17.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

SPDR Dow Jones  vs.  Lyxor MSCI Brazil

SPDR Dow Jones

Risk-Adjusted Performance

Very Weak

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

Lyxor MSCI Brazil

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor MSCI Brazil are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Lyxor MSCI unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SPDR Dow and Lyxor MSCI

The main advantage of trading using opposite SPDR Dow and Lyxor MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Dow 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 SPDR Dow Jones and Lyxor MSCI Brazil 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .