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 India, 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

-0.03

Correlation Coefficient

IShares SP  Lyxor MSCI

Good diversification

The 3 months correlation between IShares and Lyxor is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP 500 and Lyxor MSCI India in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyxor MSCI India 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 India 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 0.98 times more return on investment than Lyxor MSCI. However, iShares SP 500 is 1.03 times less risky than Lyxor MSCI. It trades about -0.01 of its potential returns per unit of risk. Lyxor MSCI India is currently generating about -0.35 per unit of risk. If you would invest  5,900  in iShares SP 500 on December 2, 2024 and sell it today you would lose (27.00) from holding iShares SP 500 or give up 0.46% of portfolio value over 90 days.

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

iShares SP 500  vs.  Lyxor MSCI India

iShares SP 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, IShares SP 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 India

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lyxor MSCI India has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Etf's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the exchange-traded fund private 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 India 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.