Correlation Between Lyxor UCITS and HSBC Emerging

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Can any of the company-specific risk be diversified away by investing in both Lyxor UCITS and HSBC Emerging 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 HSBC Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lyxor UCITS NASDAQ 100 and HSBC Emerging Market, you can compare the effects of market volatilities on Lyxor UCITS and HSBC Emerging 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 HSBC Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lyxor UCITS and HSBC Emerging.

Diversification Opportunities for Lyxor UCITS and HSBC Emerging

LyxorHSBCDiversified AwayLyxorHSBCDiversified Away100%
0.51
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Lyxor and HSBC is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor UCITS NASDAQ 100 and HSBC Emerging Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HSBC Emerging Market 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 NASDAQ 100 are associated (or correlated) with HSBC Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HSBC Emerging Market has no effect on the direction of Lyxor UCITS i.e., Lyxor UCITS and HSBC Emerging go up and down completely randomly.

Pair Corralation between Lyxor UCITS and HSBC Emerging

Assuming the 90 days trading horizon Lyxor UCITS is expected to generate 3.16 times less return on investment than HSBC Emerging. In addition to that, Lyxor UCITS is 2.85 times more volatile than HSBC Emerging Market. It trades about 0.01 of its total potential returns per unit of risk. HSBC Emerging Market is currently generating about 0.13 per unit of volatility. If you would invest  1,444  in HSBC Emerging Market on November 29, 2024 and sell it today you would earn a total of  88.00  from holding HSBC Emerging Market or generate 6.09% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy98.39%
ValuesDaily Returns

Lyxor UCITS NASDAQ 100  vs.  HSBC Emerging Market

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -2024681012
JavaScript chart by amCharts 3.21.15LQQ HSEM
       Timeline  
Lyxor UCITS NASDAQ 

Risk-Adjusted Performance

Weak

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor UCITS NASDAQ 100 are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.
JavaScript chart by amCharts 3.21.15JanFebFeb1,2001,2501,3001,3501,400
HSBC Emerging Market 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in HSBC Emerging Market are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, HSBC Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15JanFebFeb14.414.614.81515.2

Lyxor UCITS and HSBC Emerging Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-6.89-5.16-3.43-1.70.01.673.425.176.938.68 0.10.20.30.40.50.60.7
JavaScript chart by amCharts 3.21.15LQQ HSEM
       Returns  

Pair Trading with Lyxor UCITS and HSBC Emerging

The main advantage of trading using opposite Lyxor UCITS and HSBC Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lyxor UCITS position performs unexpectedly, HSBC Emerging 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 HSBC Emerging will offset losses from the drop in HSBC Emerging's long position.
The idea behind Lyxor UCITS NASDAQ 100 and HSBC Emerging Market 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.

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