Correlation Between Lyxor Japan and IShares BRIC

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

By analyzing existing cross correlation between Lyxor Japan UCITS and iShares BRIC 50, you can compare the effects of market volatilities on Lyxor Japan and IShares BRIC 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 Japan with a short position of IShares BRIC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lyxor Japan and IShares BRIC.

Diversification Opportunities for Lyxor Japan and IShares BRIC

-0.12

Correlation Coefficient

Lyxor Japan  IShares BRIC

Good diversification

The 3 months correlation between Lyxor and IShares is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor Japan UCITS and iShares BRIC 50 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares BRIC 50 and Lyxor Japan 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 Japan UCITS are associated (or correlated) with IShares BRIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares BRIC 50 has no effect on the direction of Lyxor Japan i.e., Lyxor Japan and IShares BRIC go up and down completely randomly.

Pair Corralation between Lyxor Japan and IShares BRIC

If you would invest  2,371,000  in Lyxor Japan UCITS on October 7, 2024 and sell it today you would earn a total of  282,500  from holding Lyxor Japan UCITS or generate 11.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Lyxor Japan UCITS  vs.  iShares BRIC 50

Lyxor Japan UCITS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lyxor Japan UCITS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Lyxor Japan is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

iShares BRIC 50

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares BRIC 50 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, IShares BRIC is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Lyxor Japan and IShares BRIC

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

The idea behind Lyxor Japan UCITS and iShares BRIC 50 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 Global Correlations module to find global opportunities by holding instruments from different markets.