Correlation Between Lyxor 1 and Iwatani

Can any of the company-specific risk be diversified away by investing in both Lyxor 1 and Iwatani 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 1 and Iwatani into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lyxor 1 and Iwatani, you can compare the effects of market volatilities on Lyxor 1 and Iwatani 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 1 with a short position of Iwatani. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lyxor 1 and Iwatani.

Diversification Opportunities for Lyxor 1 and Iwatani

-0.56

Correlation Coefficient

Lyxor 1  Iwatani

Excellent diversification

The 3 months correlation between Lyxor and Iwatani is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor 1 and Iwatani in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iwatani and Lyxor 1 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 1 are associated (or correlated) with Iwatani. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iwatani has no effect on the direction of Lyxor 1 i.e., Lyxor 1 and Iwatani go up and down completely randomly.

Pair Corralation between Lyxor 1 and Iwatani

Assuming the 90 days trading horizon Lyxor 1 is expected to generate 0.4 times more return on investment than Iwatani. However, Lyxor 1 is 2.53 times less risky than Iwatani. It trades about 0.57 of its potential returns per unit of risk. Iwatani is currently generating about -0.29 per unit of risk. If you would invest  2,414  in Lyxor 1 on September 20, 2024 and sell it today you would earn a total of  146.00  from holding Lyxor 1 or generate 6.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Lyxor 1   vs.  Iwatani

Lyxor 1

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor 1 are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Lyxor 1 may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Iwatani

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Iwatani has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Lyxor 1 and Iwatani

The main advantage of trading using opposite Lyxor 1 and Iwatani positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lyxor 1 position performs unexpectedly, Iwatani 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 Iwatani will offset losses from the drop in Iwatani's long position.

The idea behind Lyxor 1 and Iwatani 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.

Check out your portfolio center.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.