Correlation Between Lyxor UCITS and Lyxor MSCI

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

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

Diversification Opportunities for Lyxor UCITS and Lyxor MSCI

0.97

Correlation Coefficient

Lyxor UCITS  Lyxor MSCI

Almost no diversification

The 3 months correlation between Lyxor and Lyxor is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor UCITS MSCI and Lyxor MSCI World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyxor MSCI World and Lyxor UCITS 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 UCITS MSCI 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 World has no effect on the direction of Lyxor UCITS i.e., Lyxor UCITS and Lyxor MSCI go up and down completely randomly.

Pair Corralation between Lyxor UCITS and Lyxor MSCI

Assuming the 90 days trading horizon Lyxor UCITS MSCI is expected to generate 1.17 times more return on investment than Lyxor MSCI. However, Lyxor UCITS is 1.17 times more volatile than Lyxor MSCI World. It trades about 0.27 of its potential returns per unit of risk. Lyxor MSCI World is currently generating about 0.2 per unit of risk. If you would invest  32,389  in Lyxor UCITS MSCI on September 13, 2024 and sell it today you would earn a total of  3,914  from holding Lyxor UCITS MSCI or generate 12.08% return on investment over 90 days.

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

Lyxor UCITS MSCI  vs.  Lyxor MSCI World

Lyxor UCITS MSCI

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor UCITS MSCI are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Lyxor UCITS may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Lyxor MSCI World

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor MSCI World are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Lyxor MSCI may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Lyxor UCITS and Lyxor MSCI

The main advantage of trading using opposite Lyxor UCITS and Lyxor MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lyxor UCITS 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 Lyxor UCITS MSCI and Lyxor MSCI World 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.