Correlation Between Vanguard and Lyxor MSCI

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

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

Diversification Opportunities for Vanguard and Lyxor MSCI

0.13

Correlation Coefficient

Vanguard  Lyxor MSCI

Average diversification

The 3 months correlation between Vanguard and Lyxor is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP 500 and Lyxor MSCI India in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyxor MSCI India and Vanguard 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 Vanguard SP 500 are associated (or correlated) with Lyxor MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lyxor MSCI India has no effect on the direction of Vanguard i.e., Vanguard and Lyxor MSCI go up and down completely randomly.

Pair Corralation between Vanguard and Lyxor MSCI

Assuming the 90 days trading horizon Vanguard SP 500 is expected to under-perform the Lyxor MSCI. In addition to that, Vanguard is 1.15 times more volatile than Lyxor MSCI India. It trades about -0.12 of its total potential returns per unit of risk. Lyxor MSCI India is currently generating about -0.08 per unit of volatility. If you would invest  3,260  in Lyxor MSCI India on December 31, 2024 and sell it today you would lose (165.00) from holding Lyxor MSCI India or give up 5.06% of portfolio value over 90 days.

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

Vanguard SP 500  vs.  Lyxor MSCI India

Vanguard SP 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Etf's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the fund sophisticated investors.

Lyxor MSCI India

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lyxor MSCI India has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Lyxor MSCI 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 Vanguard and Lyxor MSCI

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

The idea behind Vanguard SP 500 and Lyxor MSCI India 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.