Correlation Between Lyxor Treasury and Lyxor Smart

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

By analyzing existing cross correlation between Lyxor Treasury 10Y and Lyxor Smart Overnight, you can compare the effects of market volatilities on Lyxor Treasury and Lyxor Smart 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 Treasury with a short position of Lyxor Smart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lyxor Treasury and Lyxor Smart.

Diversification Opportunities for Lyxor Treasury and Lyxor Smart

-0.27

Correlation Coefficient

Lyxor Treasury  Lyxor Smart

Very good diversification

The 3 months correlation between Lyxor and Lyxor is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor Treasury 10Y and Lyxor Smart Overnight in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyxor Smart Overnight and Lyxor Treasury 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 Treasury 10Y are associated (or correlated) with Lyxor Smart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lyxor Smart Overnight has no effect on the direction of Lyxor Treasury i.e., Lyxor Treasury and Lyxor Smart go up and down completely randomly.

Pair Corralation between Lyxor Treasury and Lyxor Smart

Assuming the 90 days trading horizon Lyxor Treasury 10Y is expected to under-perform the Lyxor Smart. In addition to that, Lyxor Treasury is 25.31 times more volatile than Lyxor Smart Overnight. It trades about -0.07 of its total potential returns per unit of risk. Lyxor Smart Overnight is currently generating about 0.63 per unit of volatility. If you would invest  120,664  in Lyxor Smart Overnight on September 14, 2024 and sell it today you would earn a total of  1,512  from holding Lyxor Smart Overnight or generate 1.25% return on investment over 90 days.

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

Lyxor Treasury 10Y  vs.  Lyxor Smart Overnight

Lyxor Treasury 10Y

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lyxor Treasury 10Y has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Lyxor Treasury is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Lyxor Smart Overnight

Risk-Adjusted Performance

49 of 100

Excellent

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor Smart Overnight are ranked lower than 49 (%) 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.

Pair Trading with Lyxor Treasury and Lyxor Smart

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

The idea behind Lyxor Treasury 10Y and Lyxor Smart Overnight 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.