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

0.94

Correlation Coefficient

Lyxor MSCI  Lyxor UCITS

Almost no diversification

The 3 months correlation between Lyxor and Lyxor is 0.94. 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 1.13 times more return on investment than Lyxor UCITS. However, Lyxor MSCI is 1.13 times more volatile than Lyxor UCITS MSCI. It trades about -0.03 of its potential returns per unit of risk. Lyxor UCITS MSCI is currently generating about -0.1 per unit of risk. If you would invest  1,313  in Lyxor MSCI World on December 29, 2024 and sell it today you would lose (33.00) from holding Lyxor MSCI World or give up 2.51% of portfolio value over 90 days.

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

Lyxor MSCI World  vs.  Lyxor UCITS MSCI

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 UCITS MSCI

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lyxor UCITS MSCI has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental 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 Commodity Directory module to find actively traded commodities issued by global exchanges.