Correlation Between Lyxor BofAML and Lyxor UCITS

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

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

Diversification Opportunities for Lyxor BofAML and Lyxor UCITS

0.17

Correlation Coefficient

Lyxor BofAML  Lyxor UCITS

Average diversification

The 3 months correlation between Lyxor and Lyxor is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor BofAML USD and Lyxor UCITS EuroMTS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyxor UCITS EuroMTS and Lyxor BofAML 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 BofAML USD are associated (or correlated) with Lyxor UCITS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lyxor UCITS EuroMTS has no effect on the direction of Lyxor BofAML i.e., Lyxor BofAML and Lyxor UCITS go up and down completely randomly.

Pair Corralation between Lyxor BofAML and Lyxor UCITS

Assuming the 90 days trading horizon Lyxor BofAML is expected to generate 1.14 times less return on investment than Lyxor UCITS. In addition to that, Lyxor BofAML is 4.93 times more volatile than Lyxor UCITS EuroMTS. It trades about 0.02 of its total potential returns per unit of risk. Lyxor UCITS EuroMTS is currently generating about 0.13 per unit of volatility. If you would invest  11,698  in Lyxor UCITS EuroMTS on November 20, 2024 and sell it today you would earn a total of  833.00  from holding Lyxor UCITS EuroMTS or generate 7.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Lyxor BofAML USD  vs.  Lyxor UCITS EuroMTS

Lyxor BofAML USD

Risk-Adjusted Performance

Very Weak

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

Lyxor UCITS EuroMTS

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor UCITS EuroMTS are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Lyxor UCITS is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Lyxor BofAML and Lyxor UCITS

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

The idea behind Lyxor BofAML USD and Lyxor UCITS EuroMTS 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.