Correlation Between IShares VII and Lyxor MSCI

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

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

Diversification Opportunities for IShares VII and Lyxor MSCI

0.44

Correlation Coefficient

IShares VII  Lyxor MSCI

Very weak diversification

The 3 months correlation between IShares and Lyxor is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding iShares VII PLC and Lyxor MSCI Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyxor MSCI Emerging and IShares VII 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 iShares VII PLC are associated (or correlated) with Lyxor MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lyxor MSCI Emerging has no effect on the direction of IShares VII i.e., IShares VII and Lyxor MSCI go up and down completely randomly.

Pair Corralation between IShares VII and Lyxor MSCI

Assuming the 90 days trading horizon iShares VII PLC is expected to generate 0.54 times more return on investment than Lyxor MSCI. However, iShares VII PLC is 1.85 times less risky than Lyxor MSCI. It trades about 0.11 of its potential returns per unit of risk. Lyxor MSCI Emerging is currently generating about 0.0 per unit of risk. If you would invest  3,660,000  in iShares VII PLC on September 12, 2024 and sell it today you would earn a total of  292,500  from holding iShares VII PLC or generate 7.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	34.38%
Values	Daily Returns

iShares VII PLC  vs.  Lyxor MSCI Emerging

iShares VII PLC

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares VII PLC are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, IShares VII may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Lyxor MSCI Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lyxor MSCI Emerging has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Lyxor MSCI 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 IShares VII and Lyxor MSCI

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

The idea behind iShares VII PLC and Lyxor MSCI Emerging 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.