Correlation Between Lyxor TIPS and Lyxor Fed

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

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

Diversification Opportunities for Lyxor TIPS and Lyxor Fed

0.91

Correlation Coefficient

Lyxor TIPS  Lyxor Fed

Almost no diversification

The 3 months correlation between Lyxor and Lyxor is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor TIPS DR and Lyxor Fed Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyxor Fed Funds and Lyxor TIPS 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 TIPS DR are associated (or correlated) with Lyxor Fed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lyxor Fed Funds has no effect on the direction of Lyxor TIPS i.e., Lyxor TIPS and Lyxor Fed go up and down completely randomly.

Pair Corralation between Lyxor TIPS and Lyxor Fed

Assuming the 90 days trading horizon Lyxor TIPS DR is expected to generate 0.98 times more return on investment than Lyxor Fed. However, Lyxor TIPS DR is 1.02 times less risky than Lyxor Fed. It trades about 0.37 of its potential returns per unit of risk. Lyxor Fed Funds is currently generating about 0.3 per unit of risk. If you would invest  10,280  in Lyxor TIPS DR on September 5, 2024 and sell it today you would earn a total of  474.00  from holding Lyxor TIPS DR or generate 4.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.65%
Values	Daily Returns

Lyxor TIPS DR  vs.  Lyxor Fed Funds

Lyxor TIPS DR

Risk-Adjusted Performance

15 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor TIPS DR are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Lyxor TIPS is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Lyxor Fed Funds

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor Fed Funds are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Lyxor Fed may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Lyxor TIPS and Lyxor Fed

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

The idea behind Lyxor TIPS DR and Lyxor Fed Funds 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.