Correlation Between Lyxor Japan and Lyxor Euro

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

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

Diversification Opportunities for Lyxor Japan and Lyxor Euro

0.09

Correlation Coefficient

Lyxor Japan  Lyxor Euro

Significant diversification

The 3 months correlation between Lyxor and Lyxor is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor Japan UCITS and Lyxor Euro Stoxx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyxor Euro Stoxx and Lyxor Japan 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 Japan UCITS are associated (or correlated) with Lyxor Euro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lyxor Euro Stoxx has no effect on the direction of Lyxor Japan i.e., Lyxor Japan and Lyxor Euro go up and down completely randomly.

Pair Corralation between Lyxor Japan and Lyxor Euro

Assuming the 90 days trading horizon Lyxor Japan is expected to generate 1.63 times less return on investment than Lyxor Euro. But when comparing it to its historical volatility, Lyxor Japan UCITS is 1.85 times less risky than Lyxor Euro. It trades about 0.06 of its potential returns per unit of risk. Lyxor Euro Stoxx is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  5,086  in Lyxor Euro Stoxx on September 16, 2024 and sell it today you would earn a total of  246.00  from holding Lyxor Euro Stoxx or generate 4.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.48%
Values	Daily Returns

Lyxor Japan UCITS  vs.  Lyxor Euro Stoxx

Lyxor Japan UCITS

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor Japan UCITS are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Lyxor Japan is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Lyxor Euro Stoxx

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor Euro Stoxx are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Lyxor Euro is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Lyxor Japan and Lyxor Euro

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

The idea behind Lyxor Japan UCITS and Lyxor Euro Stoxx 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.