Correlation Between Lyxor UCITS and IShares MSCI

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

Diversification Opportunities for Lyxor UCITS and IShares MSCI

0.63

Correlation Coefficient

Lyxor UCITS  IShares MSCI

Poor diversification

The 3 months correlation between Lyxor and IShares is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor UCITS Stoxx and iShares MSCI Korea in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI Korea 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 IShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI Korea has no effect on the direction of Lyxor UCITS i.e., Lyxor UCITS and IShares MSCI go up and down completely randomly.

Pair Corralation between Lyxor UCITS and IShares MSCI

Assuming the 90 days trading horizon Lyxor UCITS is expected to generate 1.1 times less return on investment than IShares MSCI. But when comparing it to its historical volatility, Lyxor UCITS Stoxx is 1.65 times less risky than IShares MSCI. It trades about 0.2 of its potential returns per unit of risk. iShares MSCI Korea is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  3,567  in iShares MSCI Korea on December 30, 2024 and sell it today you would earn a total of  421.00  from holding iShares MSCI Korea or generate 11.8% return on investment over 90 days.

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

Lyxor UCITS Stoxx  vs.  iShares MSCI Korea

Lyxor UCITS Stoxx

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor UCITS Stoxx are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal technical and fundamental indicators, Lyxor UCITS may actually be approaching a critical reversion point that can send shares even higher in April 2025.

iShares MSCI Korea

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI Korea are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, IShares MSCI may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Lyxor UCITS and IShares MSCI

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

The idea behind Lyxor UCITS Stoxx and iShares MSCI Korea 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 Anywhere module to track or share privately all of your investments from the convenience of any device.