Correlation Between IShares Property and Lyxor Japan

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

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

Diversification Opportunities for IShares Property and Lyxor Japan

-0.36

Correlation Coefficient

IShares Property  Lyxor Japan

Very good diversification

The 3 months correlation between IShares and Lyxor is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding iShares Property Yield and Lyxor Japan UCITS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyxor Japan UCITS and IShares Property 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 Property Yield are associated (or correlated) with Lyxor Japan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lyxor Japan UCITS has no effect on the direction of IShares Property i.e., IShares Property and Lyxor Japan go up and down completely randomly.

Pair Corralation between IShares Property and Lyxor Japan

Assuming the 90 days trading horizon iShares Property Yield is expected to under-perform the Lyxor Japan. But the etf apears to be less risky and, when comparing its historical volatility, iShares Property Yield is 1.24 times less risky than Lyxor Japan. The etf trades about -0.06 of its potential returns per unit of risk. The Lyxor Japan UCITS is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2,474,500  in Lyxor Japan UCITS on September 13, 2024 and sell it today you would earn a total of  173,000  from holding Lyxor Japan UCITS or generate 6.99% return on investment over 90 days.

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

iShares Property Yield  vs.  Lyxor Japan UCITS

iShares Property Yield

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Property Yield has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, IShares Property is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Lyxor Japan UCITS

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor Japan UCITS are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Lyxor Japan may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IShares Property and Lyxor Japan

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

The idea behind iShares Property Yield and Lyxor Japan UCITS 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.