Correlation Between Lyxor UCITS and SPDR SP

Can any of the company-specific risk be diversified away by investing in both Lyxor UCITS and SPDR SP 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 SPDR SP 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 SPDR SP 500, you can compare the effects of market volatilities on Lyxor UCITS and SPDR SP 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 SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lyxor UCITS and SPDR SP.

Diversification Opportunities for Lyxor UCITS and SPDR SP

0.74

Correlation Coefficient

Lyxor UCITS  SPDR SP

Poor diversification

The 3 months correlation between Lyxor and SPDR is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor UCITS Japan and SPDR SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP 500 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 SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP 500 has no effect on the direction of Lyxor UCITS i.e., Lyxor UCITS and SPDR SP go up and down completely randomly.

Pair Corralation between Lyxor UCITS and SPDR SP

Assuming the 90 days trading horizon Lyxor UCITS Japan is expected to under-perform the SPDR SP. In addition to that, Lyxor UCITS is 1.25 times more volatile than SPDR SP 500. It trades about -0.15 of its total potential returns per unit of risk. SPDR SP 500 is currently generating about -0.1 per unit of volatility. If you would invest  57,526  in SPDR SP 500 on October 14, 2024 and sell it today you would lose (696.00) from holding SPDR SP 500 or give up 1.21% 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.  SPDR SP 500

Lyxor UCITS Japan

Risk-Adjusted Performance

0 of 100

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.

SPDR SP 500

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP 500 are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SPDR SP may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Lyxor UCITS and SPDR SP

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

The idea behind Lyxor UCITS Japan and SPDR SP 500 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.