Correlation Between Lyxor 10Y and Franklin FTSE

Can any of the company-specific risk be diversified away by investing in both Lyxor 10Y and Franklin FTSE 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 10Y and Franklin FTSE into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Lyxor 10Y and Franklin FTSE

0.8

Correlation Coefficient

Lyxor 10Y  Franklin FTSE

Very poor diversification

The 3 months correlation between Lyxor and Franklin is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor 10Y Inflation and Franklin FTSE Brazil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin FTSE Brazil and Lyxor 10Y 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 10Y Inflation are associated (or correlated) with Franklin FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin FTSE Brazil has no effect on the direction of Lyxor 10Y i.e., Lyxor 10Y and Franklin FTSE go up and down completely randomly.

Pair Corralation between Lyxor 10Y and Franklin FTSE

Assuming the 90 days trading horizon Lyxor 10Y is expected to generate 6.93 times less return on investment than Franklin FTSE. But when comparing it to its historical volatility, Lyxor 10Y Inflation is 7.94 times less risky than Franklin FTSE. It trades about 0.18 of its potential returns per unit of risk. Franklin FTSE Brazil is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,632  in Franklin FTSE Brazil on December 29, 2024 and sell it today you would earn a total of  210.00  from holding Franklin FTSE Brazil or generate 12.87% return on investment over 90 days.

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

Lyxor 10Y Inflation  vs.  Franklin FTSE Brazil

Lyxor 10Y Inflation

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor 10Y Inflation are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Lyxor 10Y is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Franklin FTSE Brazil

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin FTSE Brazil are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Franklin FTSE may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Lyxor 10Y and Franklin FTSE

The main advantage of trading using opposite Lyxor 10Y and Franklin FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lyxor 10Y position performs unexpectedly, Franklin FTSE 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 Franklin FTSE will offset losses from the drop in Franklin FTSE's long position.

The idea behind Lyxor 10Y Inflation and Franklin FTSE 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.

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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 Money Managers module to screen money managers from public funds and ETFs managed around the world.