Correlation Between IShares Core and Lyxor 1

Can any of the company-specific risk be diversified away by investing in both IShares Core and Lyxor 1 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 Core and Lyxor 1 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares Core MSCI and Lyxor 1 TecDAX, you can compare the effects of market volatilities on IShares Core and Lyxor 1 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 Core with a short position of Lyxor 1. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and Lyxor 1.

Diversification Opportunities for IShares Core and Lyxor 1

0.71

Correlation Coefficient

IShares Core  Lyxor 1

Poor diversification

The 3 months correlation between IShares and Lyxor is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core MSCI and Lyxor 1 TecDAX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyxor 1 TecDAX and IShares 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 iShares Core MSCI are associated (or correlated) with Lyxor 1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lyxor 1 TecDAX has no effect on the direction of IShares Core i.e., IShares Core and Lyxor 1 go up and down completely randomly.

Pair Corralation between IShares Core and Lyxor 1

Assuming the 90 days trading horizon iShares Core MSCI is expected to generate 1.01 times more return on investment than Lyxor 1. However, IShares Core is 1.01 times more volatile than Lyxor 1 TecDAX. It trades about 0.12 of its potential returns per unit of risk. Lyxor 1 TecDAX is currently generating about 0.1 per unit of risk. If you would invest  425.00  in iShares Core MSCI on September 5, 2024 and sell it today you would earn a total of  32.00  from holding iShares Core MSCI or generate 7.53% return on investment over 90 days.

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

iShares Core MSCI  vs.  Lyxor 1 TecDAX

iShares Core MSCI

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core MSCI are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, IShares Core may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Lyxor 1 TecDAX

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor 1 TecDAX are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Lyxor 1 is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with IShares Core and Lyxor 1

The main advantage of trading using opposite IShares Core and Lyxor 1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core position performs unexpectedly, Lyxor 1 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 1 will offset losses from the drop in Lyxor 1's long position.

The idea behind iShares Core MSCI and Lyxor 1 TecDAX 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.