Correlation Between LYXOR DAILY and LYXOR EURO

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

Diversification Opportunities for LYXOR DAILY and LYXOR EURO

0.52

Correlation Coefficient

LYXOR DAILY  LYXOR EURO

Very weak diversification

The 3 months correlation between LYXOR and LYXOR is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding LYXOR DAILY SHORTDAX and LYXOR EURO STOXX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LYXOR EURO STOXX 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 LYXOR EURO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LYXOR EURO STOXX has no effect on the direction of LYXOR DAILY i.e., LYXOR DAILY and LYXOR EURO go up and down completely randomly.

Pair Corralation between LYXOR DAILY and LYXOR EURO

Assuming the 90 days trading horizon LYXOR DAILY SHORTDAX is expected to under-perform the LYXOR EURO. But the etf apears to be less risky and, when comparing its historical volatility, LYXOR DAILY SHORTDAX is 1.22 times less risky than LYXOR EURO. The etf trades about -0.05 of its potential returns per unit of risk. The LYXOR EURO STOXX is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  77.00  in LYXOR EURO STOXX on September 3, 2024 and sell it today you would earn a total of  5.00  from holding LYXOR EURO STOXX or generate 6.49% return on investment over 90 days.

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

LYXOR DAILY SHORTDAX  vs.  LYXOR EURO STOXX

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 nearly stable basic indicators, LYXOR DAILY is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

LYXOR EURO STOXX

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in LYXOR EURO STOXX are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady forward-looking signals, LYXOR EURO may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with LYXOR DAILY and LYXOR EURO

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

The idea behind LYXOR DAILY SHORTDAX and LYXOR EURO STOXX 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 Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.