Correlation Between Lyxor Index and Lyxor 1

Can any of the company-specific risk be diversified away by investing in both Lyxor Index and Lyxor 1 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 Index and Lyxor 1 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lyxor Index Fund and Lyxor 1 TecDAX, you can compare the effects of market volatilities on Lyxor Index and Lyxor 1 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 Index with a short position of Lyxor 1. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lyxor Index and Lyxor 1.

Diversification Opportunities for Lyxor Index and Lyxor 1

0.62

Correlation Coefficient

Lyxor Index  Lyxor 1

Poor diversification

The 3 months correlation between Lyxor and Lyxor is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor Index Fund and Lyxor 1 TecDAX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyxor 1 TecDAX and Lyxor Index 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 Index Fund are associated (or correlated) with Lyxor 1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lyxor 1 TecDAX has no effect on the direction of Lyxor Index i.e., Lyxor Index and Lyxor 1 go up and down completely randomly.

Pair Corralation between Lyxor Index and Lyxor 1

Assuming the 90 days trading horizon Lyxor Index is expected to generate 1.14 times less return on investment than Lyxor 1. In addition to that, Lyxor Index is 1.0 times more volatile than Lyxor 1 TecDAX. It trades about 0.11 of its total potential returns per unit of risk. Lyxor 1 TecDAX is currently generating about 0.13 per unit of volatility. If you would invest  2,400  in Lyxor 1 TecDAX on September 14, 2024 and sell it today you would earn a total of  187.00  from holding Lyxor 1 TecDAX or generate 7.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	84.38%
Values	Daily Returns

Lyxor Index Fund  vs.  Lyxor 1 TecDAX

Lyxor Index Fund

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor Index Fund are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Lyxor Index may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Lyxor 1 TecDAX

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor 1 TecDAX are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Lyxor 1 may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Lyxor Index and Lyxor 1

The main advantage of trading using opposite Lyxor Index and Lyxor 1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lyxor Index position performs unexpectedly, Lyxor 1 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 1 will offset losses from the drop in Lyxor 1's long position.

The idea behind Lyxor Index Fund and Lyxor 1 TecDAX 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.