Correlation Between LYXOR DAILY and IShares STOXX

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

By analyzing existing cross correlation between LYXOR DAILY SHORTDAX and iShares STOXX Europe, you can compare the effects of market volatilities on LYXOR DAILY and IShares STOXX 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 DAILY with a short position of IShares STOXX. Check out your portfolio center. Please also check ongoing floating volatility patterns of LYXOR DAILY and IShares STOXX.

Diversification Opportunities for LYXOR DAILY and IShares STOXX

-0.3

Correlation Coefficient

LYXOR DAILY  IShares STOXX

Very good diversification

The 3 months correlation between LYXOR and IShares is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding LYXOR DAILY SHORTDAX and iShares STOXX Europe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares STOXX Europe and LYXOR DAILY 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 DAILY SHORTDAX are associated (or correlated) with IShares STOXX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares STOXX Europe has no effect on the direction of LYXOR DAILY i.e., LYXOR DAILY and IShares STOXX go up and down completely randomly.

Pair Corralation between LYXOR DAILY and IShares STOXX

Assuming the 90 days trading horizon LYXOR DAILY SHORTDAX is expected to under-perform the IShares STOXX. In addition to that, LYXOR DAILY is 2.25 times more volatile than iShares STOXX Europe. It trades about -0.09 of its total potential returns per unit of risk. iShares STOXX Europe is currently generating about -0.05 per unit of volatility. If you would invest  5,084  in iShares STOXX Europe on September 22, 2024 and sell it today you would lose (110.00) from holding iShares STOXX Europe or give up 2.16% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

LYXOR DAILY SHORTDAX  vs.  iShares STOXX Europe

LYXOR DAILY SHORTDAX

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LYXOR DAILY SHORTDAX has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Etf's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the Exchange Traded Fund stockholders.

iShares STOXX Europe

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares STOXX Europe has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, IShares STOXX is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with LYXOR DAILY and IShares STOXX

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

The idea behind LYXOR DAILY SHORTDAX and iShares STOXX Europe 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.