Correlation Between Lyxor Japan and Vanguard FTSE

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

Diversification Opportunities for Lyxor Japan and Vanguard FTSE

0.04

Correlation Coefficient

Lyxor Japan  Vanguard FTSE

Significant diversification

The 3 months correlation between Lyxor and Vanguard is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor Japan UCITS and Vanguard FTSE Developed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard FTSE Developed 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 Vanguard FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard FTSE Developed has no effect on the direction of Lyxor Japan i.e., Lyxor Japan and Vanguard FTSE go up and down completely randomly.

Pair Corralation between Lyxor Japan and Vanguard FTSE

Assuming the 90 days trading horizon Lyxor Japan UCITS is expected to generate 1.07 times more return on investment than Vanguard FTSE. However, Lyxor Japan is 1.07 times more volatile than Vanguard FTSE Developed. It trades about 0.0 of its potential returns per unit of risk. Vanguard FTSE Developed is currently generating about -0.03 per unit of risk. If you would invest  2,639,500  in Lyxor Japan UCITS on December 2, 2024 and sell it today you would lose (9,000) from holding Lyxor Japan UCITS or give up 0.34% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Lyxor Japan UCITS  vs.  Vanguard FTSE Developed

Lyxor Japan UCITS

Risk-Adjusted Performance

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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Vanguard FTSE Developed

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard FTSE Developed has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Vanguard FTSE 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 Vanguard FTSE

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

The idea behind Lyxor Japan UCITS and Vanguard FTSE Developed 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.