Correlation Between Lyxor UCITS and Lyxor Commodities

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

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

Diversification Opportunities for Lyxor UCITS and Lyxor Commodities

0.61

Correlation Coefficient

Lyxor UCITS  Lyxor Commodities

Poor diversification

The 3 months correlation between Lyxor and Lyxor is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor UCITS Dow and Lyxor Commodities RefinitivCor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyxor Commodities and Lyxor UCITS 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 Lyxor UCITS Dow are associated (or correlated) with Lyxor Commodities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lyxor Commodities has no effect on the direction of Lyxor UCITS i.e., Lyxor UCITS and Lyxor Commodities go up and down completely randomly.

Pair Corralation between Lyxor UCITS and Lyxor Commodities

Assuming the 90 days trading horizon Lyxor UCITS is expected to generate 1.51 times less return on investment than Lyxor Commodities. But when comparing it to its historical volatility, Lyxor UCITS Dow is 1.33 times less risky than Lyxor Commodities. It trades about 0.12 of its potential returns per unit of risk. Lyxor Commodities RefinitivCoreCommodity is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  2,270  in Lyxor Commodities RefinitivCoreCommodity on September 13, 2024 and sell it today you would earn a total of  54.00  from holding Lyxor Commodities RefinitivCoreCommodity or generate 2.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

Lyxor UCITS Dow  vs.  Lyxor Commodities RefinitivCor

Lyxor UCITS Dow

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor UCITS Dow are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Lyxor UCITS may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Lyxor Commodities

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor Commodities RefinitivCoreCommodity are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Lyxor Commodities may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Lyxor UCITS and Lyxor Commodities

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

The idea behind Lyxor UCITS Dow and Lyxor Commodities RefinitivCoreCommodity 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.