Correlation Between Lyxor UCITS and IShares Digital

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

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

Diversification Opportunities for Lyxor UCITS and IShares Digital

0.73

Correlation Coefficient

Lyxor UCITS  IShares Digital

Poor diversification

The 3 months correlation between Lyxor and IShares is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor UCITS Japan and iShares Digital Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Digital Ente and Lyxor UCITS 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 UCITS Japan are associated (or correlated) with IShares Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Digital Ente has no effect on the direction of Lyxor UCITS i.e., Lyxor UCITS and IShares Digital go up and down completely randomly.

Pair Corralation between Lyxor UCITS and IShares Digital

Assuming the 90 days trading horizon Lyxor UCITS Japan is expected to generate 0.68 times more return on investment than IShares Digital. However, Lyxor UCITS Japan is 1.48 times less risky than IShares Digital. It trades about 0.0 of its potential returns per unit of risk. iShares Digital Entertainment is currently generating about -0.02 per unit of risk. If you would invest  16,372  in Lyxor UCITS Japan on December 30, 2024 and sell it today you would lose (54.00) from holding Lyxor UCITS Japan or give up 0.33% of portfolio value over 90 days.

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

Lyxor UCITS Japan  vs.  iShares Digital Entertainment

Lyxor UCITS Japan

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lyxor UCITS Japan has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Lyxor UCITS is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

iShares Digital Ente

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Digital Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, IShares Digital is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lyxor UCITS and IShares Digital

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

The idea behind Lyxor UCITS Japan and iShares Digital Entertainment 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.