Correlation Between Lyxor PEA and Lyxor UCITS

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

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

Diversification Opportunities for Lyxor PEA and Lyxor UCITS

0.71

Correlation Coefficient

Lyxor PEA  Lyxor UCITS

Poor diversification

The 3 months correlation between Lyxor and Lyxor is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor PEA SP and Lyxor UCITS Japan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyxor UCITS Japan and Lyxor PEA 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 PEA SP are associated (or correlated) with Lyxor UCITS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lyxor UCITS Japan has no effect on the direction of Lyxor PEA i.e., Lyxor PEA and Lyxor UCITS go up and down completely randomly.

Pair Corralation between Lyxor PEA and Lyxor UCITS

Assuming the 90 days trading horizon Lyxor PEA is expected to generate 1.03 times less return on investment than Lyxor UCITS. But when comparing it to its historical volatility, Lyxor PEA SP is 1.35 times less risky than Lyxor UCITS. It trades about 0.19 of its potential returns per unit of risk. Lyxor UCITS Japan is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  21,599  in Lyxor UCITS Japan on September 13, 2024 and sell it today you would earn a total of  556.00  from holding Lyxor UCITS Japan or generate 2.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

Lyxor PEA SP  vs.  Lyxor UCITS Japan

Lyxor PEA SP

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor PEA SP are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lyxor PEA sustained solid returns over the last few months and may actually be approaching a breakup point.

Lyxor UCITS Japan

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor UCITS Japan are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lyxor UCITS may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Lyxor PEA and Lyxor UCITS

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

The idea behind Lyxor PEA SP and Lyxor UCITS Japan 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.