Correlation Between Lyxor Treasury and Lyxor Index

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

Diversification Opportunities for Lyxor Treasury and Lyxor Index

0.68

Correlation Coefficient

Lyxor Treasury  Lyxor Index

Poor diversification

The 3 months correlation between Lyxor and Lyxor is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor Treasury 10Y 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 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 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 Lyxor Treasury i.e., Lyxor Treasury and Lyxor Index go up and down completely randomly.

Pair Corralation between Lyxor Treasury and Lyxor Index

Assuming the 90 days trading horizon Lyxor Treasury 10Y is expected to under-perform the Lyxor Index. But the etf apears to be less risky and, when comparing its historical volatility, Lyxor Treasury 10Y is 1.1 times less risky than Lyxor Index. The etf trades about -0.05 of its potential returns per unit of risk. The Lyxor Index Fund is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  7,005  in Lyxor Index Fund on September 4, 2024 and sell it today you would lose (29.00) from holding Lyxor Index Fund or give up 0.41% of portfolio value over 90 days.

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

Lyxor Treasury 10Y  vs.  Lyxor Index Fund

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. Despite somewhat strong basic indicators, Lyxor Treasury is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Lyxor Index Fund

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lyxor Index Fund has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward indicators, Lyxor Index is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lyxor Treasury and Lyxor Index

The main advantage of trading using opposite Lyxor Treasury and Lyxor Index positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lyxor Treasury 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 Lyxor Treasury 10Y 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.