Correlation Between Lyxor Smart and Lyxor UCITS

Can any of the company-specific risk be diversified away by investing in both Lyxor Smart 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 Smart 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 Smart Overnight and Lyxor UCITS iBoxx, you can compare the effects of market volatilities on Lyxor Smart 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 Smart with a short position of Lyxor UCITS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lyxor Smart and Lyxor UCITS.

Diversification Opportunities for Lyxor Smart and Lyxor UCITS

0.82

Correlation Coefficient

Lyxor Smart  Lyxor UCITS

Very poor diversification

The 3 months correlation between Lyxor and Lyxor is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor Smart Overnight and Lyxor UCITS iBoxx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyxor UCITS iBoxx and Lyxor Smart 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 Smart Overnight 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 iBoxx has no effect on the direction of Lyxor Smart i.e., Lyxor Smart and Lyxor UCITS go up and down completely randomly.

Pair Corralation between Lyxor Smart and Lyxor UCITS

Assuming the 90 days trading horizon Lyxor Smart is expected to generate 2.6 times less return on investment than Lyxor UCITS. But when comparing it to its historical volatility, Lyxor Smart Overnight is 12.62 times less risky than Lyxor UCITS. It trades about 0.6 of its potential returns per unit of risk. Lyxor UCITS iBoxx is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  769,200  in Lyxor UCITS iBoxx on September 3, 2024 and sell it today you would earn a total of  26,100  from holding Lyxor UCITS iBoxx or generate 3.39% return on investment over 90 days.

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

Lyxor Smart Overnight  vs.  Lyxor UCITS iBoxx

Lyxor Smart Overnight

Risk-Adjusted Performance

47 of 100

Excellent

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor Smart Overnight are ranked lower than 47 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Lyxor Smart is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Lyxor UCITS iBoxx

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor UCITS iBoxx are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Lyxor UCITS is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Lyxor Smart and Lyxor UCITS

The main advantage of trading using opposite Lyxor Smart and Lyxor UCITS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lyxor Smart 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 Smart Overnight and Lyxor UCITS iBoxx 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.