Correlation Between Titan Company and Lyxor Index

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

By analyzing existing cross correlation between Titan Company Limited and Lyxor Index Fund, you can compare the effects of market volatilities on Titan Company and Lyxor Index 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 Titan Company with a short position of Lyxor Index. Check out your portfolio center. Please also check ongoing floating volatility patterns of Titan Company and Lyxor Index.

Diversification Opportunities for Titan Company and Lyxor Index

-0.78

Correlation Coefficient

Titan Company  Lyxor Index

Pay attention - limited upside

The 3 months correlation between Titan and Lyxor is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Titan Company Limited and Lyxor Index Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyxor Index Fund and Titan Company 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 Titan Company Limited are associated (or correlated) with Lyxor Index. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lyxor Index Fund has no effect on the direction of Titan Company i.e., Titan Company and Lyxor Index go up and down completely randomly.

Pair Corralation between Titan Company and Lyxor Index

Assuming the 90 days trading horizon Titan Company Limited is expected to under-perform the Lyxor Index. In addition to that, Titan Company is 1.91 times more volatile than Lyxor Index Fund. It trades about -0.05 of its total potential returns per unit of risk. Lyxor Index Fund is currently generating about 0.31 per unit of volatility. If you would invest  6,789  in Lyxor Index Fund on December 30, 2024 and sell it today you would earn a total of  1,181  from holding Lyxor Index Fund or generate 17.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.92%
Values	Daily Returns

Titan Company Limited  vs.  Lyxor Index Fund

Titan Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Titan Company Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Titan Company is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Lyxor Index Fund

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor Index Fund are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lyxor Index sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Titan Company and Lyxor Index

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

The idea behind Titan Company Limited and Lyxor Index Fund 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.