Correlation Between Xtrackers MSCI and Lyxor Index

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

Diversification Opportunities for Xtrackers MSCI and Lyxor Index

0.65

Correlation Coefficient

Xtrackers MSCI  Lyxor Index

Poor diversification

The 3 months correlation between Xtrackers and Lyxor is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers MSCI and Lyxor Index Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyxor Index Fund 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 Index. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lyxor Index Fund has no effect on the direction of Xtrackers MSCI i.e., Xtrackers MSCI and Lyxor Index go up and down completely randomly.

Pair Corralation between Xtrackers MSCI and Lyxor Index

Assuming the 90 days trading horizon Xtrackers MSCI is expected to generate 0.86 times more return on investment than Lyxor Index. However, Xtrackers MSCI is 1.17 times less risky than Lyxor Index. It trades about 0.09 of its potential returns per unit of risk. Lyxor Index Fund is currently generating about 0.02 per unit of risk. If you would invest  3,192  in Xtrackers MSCI on September 28, 2024 and sell it today you would earn a total of  118.00  from holding Xtrackers MSCI or generate 3.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.55%
Values	Daily Returns

Xtrackers MSCI  vs.  Lyxor Index Fund

Xtrackers MSCI

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers MSCI are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Xtrackers MSCI is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Lyxor Index Fund

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor Index Fund are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Lyxor Index is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Xtrackers MSCI and Lyxor Index

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

The idea behind Xtrackers MSCI and Lyxor Index Fund 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.