Correlation Between Lyxor MSCI and Invesco Technology

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

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

Diversification Opportunities for Lyxor MSCI and Invesco Technology

0.95

Correlation Coefficient

Lyxor MSCI  Invesco Technology

Almost no diversification

The 3 months correlation between Lyxor and Invesco is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor MSCI World and Invesco Technology SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Technology and Lyxor MSCI 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 MSCI World are associated (or correlated) with Invesco Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Technology has no effect on the direction of Lyxor MSCI i.e., Lyxor MSCI and Invesco Technology go up and down completely randomly.

Pair Corralation between Lyxor MSCI and Invesco Technology

Assuming the 90 days trading horizon Lyxor MSCI is expected to generate 1.3 times less return on investment than Invesco Technology. In addition to that, Lyxor MSCI is 1.0 times more volatile than Invesco Technology SP. It trades about 0.17 of its total potential returns per unit of risk. Invesco Technology SP is currently generating about 0.22 per unit of volatility. If you would invest  4,621,500  in Invesco Technology SP on September 5, 2024 and sell it today you would earn a total of  816,250  from holding Invesco Technology SP or generate 17.66% return on investment over 90 days.

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

Lyxor MSCI World  vs.  Invesco Technology SP

Lyxor MSCI World

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor MSCI World are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Lyxor MSCI may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Invesco Technology

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Technology SP are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Invesco Technology unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lyxor MSCI and Invesco Technology

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

The idea behind Lyxor MSCI World and Invesco Technology SP 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.

Check out your portfolio center.

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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.