Correlation Between Lyxor MSCI and Xtrackers MSCI

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

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

Diversification Opportunities for Lyxor MSCI and Xtrackers MSCI

0.72

Correlation Coefficient

Lyxor MSCI  Xtrackers MSCI

Poor diversification

The 3 months correlation between Lyxor and Xtrackers is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor MSCI China and Xtrackers MSCI Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers MSCI Emerging and Lyxor MSCI 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 MSCI China are associated (or correlated) with Xtrackers MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers MSCI Emerging has no effect on the direction of Lyxor MSCI i.e., Lyxor MSCI and Xtrackers MSCI go up and down completely randomly.

Pair Corralation between Lyxor MSCI and Xtrackers MSCI

Assuming the 90 days trading horizon Lyxor MSCI China is expected to generate 1.94 times more return on investment than Xtrackers MSCI. However, Lyxor MSCI is 1.94 times more volatile than Xtrackers MSCI Emerging. It trades about 0.11 of its potential returns per unit of risk. Xtrackers MSCI Emerging is currently generating about 0.1 per unit of risk. If you would invest  1,514  in Lyxor MSCI China on September 28, 2024 and sell it today you would earn a total of  54.00  from holding Lyxor MSCI China or generate 3.57% return on investment over 90 days.

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

Lyxor MSCI China  vs.  Xtrackers MSCI Emerging

Lyxor MSCI China

Risk-Adjusted Performance

0 of 100

Very Weak

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

Xtrackers MSCI Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Lyxor MSCI and Xtrackers MSCI

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

The idea behind Lyxor MSCI China and Xtrackers MSCI Emerging 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.