Correlation Between Lyxor Smart and IShares MSCI

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

Diversification Opportunities for Lyxor Smart and IShares MSCI

0.47

Correlation Coefficient

Lyxor Smart  IShares MSCI

Very weak diversification

The 3 months correlation between Lyxor and IShares is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor Smart Overnight and iShares MSCI Japan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI Japan and Lyxor Smart 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 Smart Overnight 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 Japan has no effect on the direction of Lyxor Smart i.e., Lyxor Smart and IShares MSCI go up and down completely randomly.

Pair Corralation between Lyxor Smart and IShares MSCI

Assuming the 90 days trading horizon Lyxor Smart is expected to generate 1.17 times less return on investment than IShares MSCI. But when comparing it to its historical volatility, Lyxor Smart Overnight is 29.69 times less risky than IShares MSCI. It trades about 0.72 of its potential returns per unit of risk. iShares MSCI Japan is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  493.00  in iShares MSCI Japan on October 11, 2024 and sell it today you would earn a total of  6.00  from holding iShares MSCI Japan or generate 1.22% return on investment over 90 days.

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

Lyxor Smart Overnight  vs.  iShares MSCI Japan

Lyxor Smart Overnight

Risk-Adjusted Performance

56 of 100

Excellent

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor Smart Overnight are ranked lower than 56 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Lyxor Smart is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

iShares MSCI Japan

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI Japan are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, IShares MSCI is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Lyxor Smart and IShares MSCI

The main advantage of trading using opposite Lyxor Smart and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lyxor Smart 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 Smart Overnight and iShares MSCI Japan 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.