Correlation Between Lyxor 1 and SPDR SP

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

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

Diversification Opportunities for Lyxor 1 and SPDR SP

0.78

Correlation Coefficient

Lyxor 1  SPDR SP

Poor diversification

The 3 months correlation between Lyxor and SPDR is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor 1 and SPDR SP Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Materials 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 SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP Materials has no effect on the direction of Lyxor 1 i.e., Lyxor 1 and SPDR SP go up and down completely randomly.

Pair Corralation between Lyxor 1 and SPDR SP

Assuming the 90 days trading horizon Lyxor 1 is expected to under-perform the SPDR SP. In addition to that, Lyxor 1 is 1.05 times more volatile than SPDR SP Materials. It trades about 0.0 of its total potential returns per unit of risk. SPDR SP Materials is currently generating about 0.08 per unit of volatility. If you would invest  4,014  in SPDR SP Materials on September 5, 2024 and sell it today you would earn a total of  343.00  from holding SPDR SP Materials or generate 8.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.22%
Values	Daily Returns

Lyxor 1   vs.  SPDR SP Materials

Lyxor 1

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor 1 are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Lyxor 1 is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

SPDR SP Materials

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP Materials are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, SPDR SP may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Lyxor 1 and SPDR SP

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

The idea behind Lyxor 1 and SPDR SP Materials 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.