Correlation Between IShares Nikkei and LYXOR DAILY

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

By analyzing existing cross correlation between iShares Nikkei 225 and LYXOR DAILY SHORTDAX, you can compare the effects of market volatilities on IShares Nikkei and LYXOR DAILY 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 Nikkei with a short position of LYXOR DAILY. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Nikkei and LYXOR DAILY.

Diversification Opportunities for IShares Nikkei and LYXOR DAILY

-0.73

Correlation Coefficient

IShares Nikkei  LYXOR DAILY

Pay attention - limited upside

The 3 months correlation between IShares and LYXOR is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding iShares Nikkei 225 and LYXOR DAILY SHORTDAX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LYXOR DAILY SHORTDAX and IShares Nikkei 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 Nikkei 225 are associated (or correlated) with LYXOR DAILY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LYXOR DAILY SHORTDAX has no effect on the direction of IShares Nikkei i.e., IShares Nikkei and LYXOR DAILY go up and down completely randomly.

Pair Corralation between IShares Nikkei and LYXOR DAILY

Assuming the 90 days trading horizon iShares Nikkei 225 is expected to generate 0.75 times more return on investment than LYXOR DAILY. However, iShares Nikkei 225 is 1.34 times less risky than LYXOR DAILY. It trades about 0.09 of its potential returns per unit of risk. LYXOR DAILY SHORTDAX is currently generating about -0.15 per unit of risk. If you would invest  2,324  in iShares Nikkei 225 on September 13, 2024 and sell it today you would earn a total of  145.00  from holding iShares Nikkei 225 or generate 6.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

iShares Nikkei 225  vs.  LYXOR DAILY SHORTDAX

iShares Nikkei 225

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Nikkei 225 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, IShares Nikkei may actually be approaching a critical reversion point that can send shares even higher in January 2025.

LYXOR DAILY SHORTDAX

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LYXOR DAILY SHORTDAX has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Etf's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the Exchange Traded Fund stockholders.

Pair Trading with IShares Nikkei and LYXOR DAILY

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

The idea behind iShares Nikkei 225 and LYXOR DAILY SHORTDAX 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.