Correlation Between SP 500 and Lyxor 10Y

Can any of the company-specific risk be diversified away by investing in both SP 500 and Lyxor 10Y 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 SP 500 and Lyxor 10Y into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SP 500 VIX and Lyxor 10Y Inflation, you can compare the effects of market volatilities on SP 500 and Lyxor 10Y 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 SP 500 with a short position of Lyxor 10Y. Check out your portfolio center. Please also check ongoing floating volatility patterns of SP 500 and Lyxor 10Y.

Diversification Opportunities for SP 500 and Lyxor 10Y

-0.47

Correlation Coefficient

SP 500  Lyxor 10Y

Very good diversification

The 3 months correlation between VILX and Lyxor is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding SP 500 VIX and Lyxor 10Y Inflation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyxor 10Y Inflation and SP 500 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 SP 500 VIX are associated (or correlated) with Lyxor 10Y. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lyxor 10Y Inflation has no effect on the direction of SP 500 i.e., SP 500 and Lyxor 10Y go up and down completely randomly.

Pair Corralation between SP 500 and Lyxor 10Y

Assuming the 90 days trading horizon SP 500 VIX is expected to under-perform the Lyxor 10Y. In addition to that, SP 500 is 42.96 times more volatile than Lyxor 10Y Inflation. It trades about -0.05 of its total potential returns per unit of risk. Lyxor 10Y Inflation is currently generating about 0.11 per unit of volatility. If you would invest  12,965  in Lyxor 10Y Inflation on October 6, 2024 and sell it today you would earn a total of  189.00  from holding Lyxor 10Y Inflation or generate 1.46% return on investment over 90 days.

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

SP 500 VIX  vs.  Lyxor 10Y Inflation

SP 500 VIX

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SP 500 VIX has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Etf's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the exchange-traded fund private investors.

Lyxor 10Y Inflation

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor 10Y Inflation are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Lyxor 10Y is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with SP 500 and Lyxor 10Y

The main advantage of trading using opposite SP 500 and Lyxor 10Y positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SP 500 position performs unexpectedly, Lyxor 10Y 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 10Y will offset losses from the drop in Lyxor 10Y's long position.

The idea behind SP 500 VIX and Lyxor 10Y Inflation 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.