Correlation Between IShares SP and Lyxor MSCI

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

By analyzing existing cross correlation between iShares SP 500 and Lyxor MSCI Europe, you can compare the effects of market volatilities on IShares SP 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 IShares SP with a short position of Lyxor MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SP and Lyxor MSCI.

Diversification Opportunities for IShares SP and Lyxor MSCI

-0.51

Correlation Coefficient

IShares SP  Lyxor MSCI

Excellent diversification

The 3 months correlation between IShares and Lyxor is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP 500 and Lyxor MSCI Europe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyxor MSCI Europe and IShares SP 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 SP 500 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 Europe has no effect on the direction of IShares SP i.e., IShares SP and Lyxor MSCI go up and down completely randomly.

Pair Corralation between IShares SP and Lyxor MSCI

Assuming the 90 days trading horizon iShares SP 500 is expected to generate 0.14 times more return on investment than Lyxor MSCI. However, iShares SP 500 is 7.38 times less risky than Lyxor MSCI. It trades about 0.21 of its potential returns per unit of risk. Lyxor MSCI Europe is currently generating about -0.05 per unit of risk. If you would invest  5,502  in iShares SP 500 on September 4, 2024 and sell it today you would earn a total of  529.00  from holding iShares SP 500 or generate 9.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.92%
Values	Daily Returns

iShares SP 500  vs.  Lyxor MSCI Europe

iShares SP 500

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SP 500 are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, IShares SP may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Lyxor MSCI Europe

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lyxor MSCI Europe has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Etf's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the fund sophisticated investors.

Pair Trading with IShares SP and Lyxor MSCI

The main advantage of trading using opposite IShares SP and Lyxor MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares SP 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 iShares SP 500 and Lyxor MSCI Europe 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.