Correlation Between Xtrackers and Lyxor BofAML

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

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

Diversification Opportunities for Xtrackers and Lyxor BofAML

0.28

Correlation Coefficient

Xtrackers  Lyxor BofAML

Modest diversification

The 3 months correlation between Xtrackers and Lyxor is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers II and Lyxor BofAML USD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyxor BofAML USD and Xtrackers 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 II are associated (or correlated) with Lyxor BofAML. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lyxor BofAML USD has no effect on the direction of Xtrackers i.e., Xtrackers and Lyxor BofAML go up and down completely randomly.

Pair Corralation between Xtrackers and Lyxor BofAML

Assuming the 90 days trading horizon Xtrackers II is expected to under-perform the Lyxor BofAML. In addition to that, Xtrackers is 2.59 times more volatile than Lyxor BofAML USD. It trades about -0.06 of its total potential returns per unit of risk. Lyxor BofAML USD is currently generating about 0.04 per unit of volatility. If you would invest  7,365  in Lyxor BofAML USD on December 30, 2024 and sell it today you would earn a total of  57.00  from holding Lyxor BofAML USD or generate 0.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Xtrackers II   vs.  Lyxor BofAML USD

Xtrackers II

Risk-Adjusted Performance

Very Weak

Over the last 90 days Xtrackers II has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Xtrackers is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Lyxor BofAML USD

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor BofAML USD are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Lyxor BofAML is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Xtrackers and Lyxor BofAML

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

The idea behind Xtrackers II and Lyxor BofAML USD 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.