Correlation Between Lyxor 10Y and IShares Edge

Can any of the company-specific risk be diversified away by investing in both Lyxor 10Y and IShares Edge 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 IShares Edge 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 iShares Edge MSCI, you can compare the effects of market volatilities on Lyxor 10Y and IShares Edge 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 IShares Edge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lyxor 10Y and IShares Edge.

Diversification Opportunities for Lyxor 10Y and IShares Edge

-0.63

Correlation Coefficient

Lyxor 10Y  IShares Edge

Excellent diversification

The 3 months correlation between Lyxor and IShares is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor 10Y Inflation and iShares Edge MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Edge MSCI 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 IShares Edge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Edge MSCI has no effect on the direction of Lyxor 10Y i.e., Lyxor 10Y and IShares Edge go up and down completely randomly.

Pair Corralation between Lyxor 10Y and IShares Edge

Assuming the 90 days trading horizon Lyxor 10Y Inflation is expected to generate 0.38 times more return on investment than IShares Edge. However, Lyxor 10Y Inflation is 2.63 times less risky than IShares Edge. It trades about 0.18 of its potential returns per unit of risk. iShares Edge MSCI is currently generating about -0.25 per unit of risk. If you would invest  13,062  in Lyxor 10Y Inflation on October 3, 2024 and sell it today you would earn a total of  75.00  from holding Lyxor 10Y Inflation or generate 0.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Lyxor 10Y Inflation  vs.  iShares Edge MSCI

Lyxor 10Y Inflation

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor 10Y Inflation are ranked lower than 9 (%) 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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

iShares Edge MSCI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Edge MSCI has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, IShares Edge is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Lyxor 10Y and IShares Edge

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

The idea behind Lyxor 10Y Inflation and iShares Edge MSCI 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.