Correlation Between Lyxor UCITS and HSBC Developed

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

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

Diversification Opportunities for Lyxor UCITS and HSBC Developed

0.16

Correlation Coefficient

Lyxor UCITS  HSBC Developed

Average diversification

The 3 months correlation between Lyxor and HSBC is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor UCITS Stoxx and HSBC Developed World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HSBC Developed World and Lyxor UCITS 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 UCITS Stoxx are associated (or correlated) with HSBC Developed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HSBC Developed World has no effect on the direction of Lyxor UCITS i.e., Lyxor UCITS and HSBC Developed go up and down completely randomly.

Pair Corralation between Lyxor UCITS and HSBC Developed

Assuming the 90 days trading horizon Lyxor UCITS Stoxx is expected to generate 1.99 times more return on investment than HSBC Developed. However, Lyxor UCITS is 1.99 times more volatile than HSBC Developed World. It trades about 0.38 of its potential returns per unit of risk. HSBC Developed World is currently generating about 0.23 per unit of risk. If you would invest  5,265  in Lyxor UCITS Stoxx on October 24, 2024 and sell it today you would earn a total of  341.00  from holding Lyxor UCITS Stoxx or generate 6.48% return on investment over 90 days.

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

Lyxor UCITS Stoxx  vs.  HSBC Developed World

Lyxor UCITS Stoxx

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor UCITS Stoxx are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Lyxor UCITS is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

HSBC Developed World

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HSBC Developed World are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, HSBC Developed is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lyxor UCITS and HSBC Developed

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

The idea behind Lyxor UCITS Stoxx and HSBC Developed World 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.