Correlation Between Lyxor Japan and IShares JP

Can any of the company-specific risk be diversified away by investing in both Lyxor Japan and IShares JP 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 IShares JP 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 iShares JP Morgan, you can compare the effects of market volatilities on Lyxor Japan and IShares JP 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 IShares JP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lyxor Japan and IShares JP.

Diversification Opportunities for Lyxor Japan and IShares JP

-0.43

Correlation Coefficient

Lyxor Japan  IShares JP

Very good diversification

The 3 months correlation between Lyxor and IShares is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor Japan UCITS and iShares JP Morgan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares JP Morgan 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 IShares JP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares JP Morgan has no effect on the direction of Lyxor Japan i.e., Lyxor Japan and IShares JP go up and down completely randomly.

Pair Corralation between Lyxor Japan and IShares JP

Assuming the 90 days trading horizon Lyxor Japan UCITS is expected to generate 2.67 times more return on investment than IShares JP. However, Lyxor Japan is 2.67 times more volatile than iShares JP Morgan. It trades about 0.11 of its potential returns per unit of risk. iShares JP Morgan is currently generating about -0.09 per unit of risk. If you would invest  2,472,000  in Lyxor Japan UCITS on September 18, 2024 and sell it today you would earn a total of  178,000  from holding Lyxor Japan UCITS or generate 7.2% return on investment over 90 days.

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

Lyxor Japan UCITS  vs.  iShares JP Morgan

Lyxor Japan UCITS

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor Japan UCITS are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Lyxor Japan may actually be approaching a critical reversion point that can send shares even higher in January 2025.

iShares JP Morgan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares JP Morgan has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, IShares JP is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Lyxor Japan and IShares JP

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

The idea behind Lyxor Japan UCITS and iShares JP Morgan 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.