Correlation Between Lyxor MSCI and Lyxor UCITS

Can any of the company-specific risk be diversified away by investing in both Lyxor MSCI and Lyxor UCITS 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 UCITS 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 UCITS MSCI, you can compare the effects of market volatilities on Lyxor MSCI and Lyxor UCITS 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 UCITS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lyxor MSCI and Lyxor UCITS.

Diversification Opportunities for Lyxor MSCI and Lyxor UCITS

-0.11

Correlation Coefficient

Lyxor MSCI  Lyxor UCITS

Good diversification

The 3 months correlation between Lyxor and Lyxor is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor MSCI World and Lyxor UCITS MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyxor UCITS MSCI 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 UCITS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lyxor UCITS MSCI has no effect on the direction of Lyxor MSCI i.e., Lyxor MSCI and Lyxor UCITS go up and down completely randomly.

Pair Corralation between Lyxor MSCI and Lyxor UCITS

Assuming the 90 days trading horizon Lyxor MSCI World is expected to generate 0.83 times more return on investment than Lyxor UCITS. However, Lyxor MSCI World is 1.2 times less risky than Lyxor UCITS. It trades about 0.2 of its potential returns per unit of risk. Lyxor UCITS MSCI is currently generating about 0.02 per unit of risk. If you would invest  1,262  in Lyxor MSCI World on September 13, 2024 and sell it today you would earn a total of  94.00  from holding Lyxor MSCI World or generate 7.45% return on investment over 90 days.

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

Lyxor MSCI World  vs.  Lyxor UCITS MSCI

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.

Lyxor UCITS MSCI

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor UCITS MSCI are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Lyxor UCITS 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 UCITS

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

The idea behind Lyxor MSCI World and Lyxor UCITS MSCI 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.