Correlation Between Lyxor Japan and Vanguard

Can any of the company-specific risk be diversified away by investing in both Lyxor Japan and Vanguard 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 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 SP 500, you can compare the effects of market volatilities on Lyxor Japan and Vanguard 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. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lyxor Japan and Vanguard.

Diversification Opportunities for Lyxor Japan and Vanguard

-0.05

Correlation Coefficient

Lyxor Japan  Vanguard

Good diversification

The 3 months correlation between Lyxor and Vanguard is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor Japan UCITS and Vanguard SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard SP 500 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. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard SP 500 has no effect on the direction of Lyxor Japan i.e., Lyxor Japan and Vanguard go up and down completely randomly.

Pair Corralation between Lyxor Japan and Vanguard

Assuming the 90 days trading horizon Lyxor Japan UCITS is expected to generate 0.89 times more return on investment than Vanguard. However, Lyxor Japan UCITS is 1.12 times less risky than Vanguard. It trades about 0.03 of its potential returns per unit of risk. Vanguard SP 500 is currently generating about -0.12 per unit of risk. If you would invest  2,658,000  in Lyxor Japan UCITS on December 31, 2024 and sell it today you would earn a total of  41,500  from holding Lyxor Japan UCITS or generate 1.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Lyxor Japan UCITS  vs.  Vanguard SP 500

Lyxor Japan UCITS

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor Japan UCITS are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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 SP 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Etf's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the fund sophisticated investors.

Pair Trading with Lyxor Japan and Vanguard

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

The idea behind Lyxor Japan UCITS and Vanguard SP 500 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.