Correlation Between Xtrackers and Lyxor TIPS

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

Diversification Opportunities for Xtrackers and Lyxor TIPS

0.82

Correlation Coefficient

Xtrackers  Lyxor TIPS

Very poor diversification

The 3 months correlation between Xtrackers and Lyxor is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers II and Lyxor TIPS DR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyxor TIPS DR 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 TIPS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lyxor TIPS DR has no effect on the direction of Xtrackers i.e., Xtrackers and Lyxor TIPS go up and down completely randomly.

Pair Corralation between Xtrackers and Lyxor TIPS

Assuming the 90 days trading horizon Xtrackers II is expected to under-perform the Lyxor TIPS. In addition to that, Xtrackers is 1.14 times more volatile than Lyxor TIPS DR. It trades about -0.06 of its total potential returns per unit of risk. Lyxor TIPS DR is currently generating about 0.0 per unit of volatility. If you would invest  10,538  in Lyxor TIPS DR on December 30, 2024 and sell it today you would lose (3.00) from holding Lyxor TIPS DR or give up 0.03% of portfolio value over 90 days.

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

Xtrackers II   vs.  Lyxor TIPS DR

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 TIPS DR

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lyxor TIPS DR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Lyxor TIPS 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 TIPS

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

The idea behind Xtrackers II and Lyxor TIPS DR 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.