Correlation Between Lyxor Index and HSBC SP

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

By analyzing existing cross correlation between Lyxor Index Fund and HSBC SP 500, you can compare the effects of market volatilities on Lyxor Index and HSBC SP 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 Index with a short position of HSBC SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lyxor Index and HSBC SP.

Diversification Opportunities for Lyxor Index and HSBC SP

-0.67

Correlation Coefficient

Lyxor Index  HSBC SP

Excellent diversification

The 3 months correlation between Lyxor and HSBC is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor Index Fund and HSBC SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HSBC SP 500 and Lyxor Index 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 Index Fund are associated (or correlated) with HSBC SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HSBC SP 500 has no effect on the direction of Lyxor Index i.e., Lyxor Index and HSBC SP go up and down completely randomly.

Pair Corralation between Lyxor Index and HSBC SP

Assuming the 90 days trading horizon Lyxor Index Fund is expected to generate 0.81 times more return on investment than HSBC SP. However, Lyxor Index Fund is 1.24 times less risky than HSBC SP. It trades about 0.2 of its potential returns per unit of risk. HSBC SP 500 is currently generating about -0.13 per unit of risk. If you would invest  6,679  in Lyxor Index Fund on December 29, 2024 and sell it today you would earn a total of  767.00  from holding Lyxor Index Fund or generate 11.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Lyxor Index Fund  vs.  HSBC SP 500

Lyxor Index Fund

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor Index Fund are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward indicators, Lyxor Index may actually be approaching a critical reversion point that can send shares even higher in April 2025.

HSBC SP 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days HSBC SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's technical indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Pair Trading with Lyxor Index and HSBC SP

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

The idea behind Lyxor Index Fund and HSBC SP 500 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.