Correlation Between Lyxor MSCI and Lyxor PEA

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

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

Diversification Opportunities for Lyxor MSCI and Lyxor PEA

0.0

Correlation Coefficient

Lyxor MSCI  Lyxor PEA

Pay attention - limited upside

The 3 months correlation between Lyxor and Lyxor is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor MSCI World and Lyxor PEA Euro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyxor PEA Euro and Lyxor MSCI 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 MSCI World are associated (or correlated) with Lyxor PEA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lyxor PEA Euro has no effect on the direction of Lyxor MSCI i.e., Lyxor MSCI and Lyxor PEA go up and down completely randomly.

Pair Corralation between Lyxor MSCI and Lyxor PEA

If you would invest (100.00) in Lyxor PEA Euro on December 2, 2024 and sell it today you would earn a total of  100.00  from holding Lyxor PEA Euro or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Lyxor MSCI World  vs.  Lyxor PEA Euro

Lyxor MSCI World

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lyxor MSCI World has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Lyxor MSCI is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Lyxor PEA Euro

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lyxor PEA Euro has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Lyxor PEA 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 MSCI and Lyxor PEA

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

The idea behind Lyxor MSCI World and Lyxor PEA Euro 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.