Correlation Between Xtrackers MSCI and Lyxor Smart

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

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

Diversification Opportunities for Xtrackers MSCI and Lyxor Smart

-0.42

Correlation Coefficient

Xtrackers MSCI  Lyxor Smart

Very good diversification

The 3 months correlation between Xtrackers and Lyxor is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers MSCI and Lyxor Smart Overnight in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyxor Smart Overnight and Xtrackers 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 Xtrackers MSCI are associated (or correlated) with Lyxor Smart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lyxor Smart Overnight has no effect on the direction of Xtrackers MSCI i.e., Xtrackers MSCI and Lyxor Smart go up and down completely randomly.

Pair Corralation between Xtrackers MSCI and Lyxor Smart

Assuming the 90 days trading horizon Xtrackers MSCI is expected to under-perform the Lyxor Smart. In addition to that, Xtrackers MSCI is 40.43 times more volatile than Lyxor Smart Overnight. It trades about -0.16 of its total potential returns per unit of risk. Lyxor Smart Overnight is currently generating about 0.72 per unit of volatility. If you would invest  121,177  in Lyxor Smart Overnight on October 11, 2024 and sell it today you would earn a total of  1,481  from holding Lyxor Smart Overnight or generate 1.22% return on investment over 90 days.

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

Xtrackers MSCI  vs.  Lyxor Smart Overnight

Xtrackers MSCI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xtrackers MSCI has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

Lyxor Smart Overnight

Risk-Adjusted Performance

56 of 100

Excellent

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor Smart Overnight are ranked lower than 56 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Lyxor Smart is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Xtrackers MSCI and Lyxor Smart

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

The idea behind Xtrackers MSCI and Lyxor Smart Overnight 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.