Correlation Between SPDR SP and Lyxor UCITS

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

By analyzing existing cross correlation between SPDR SP 500 and Lyxor UCITS Stoxx, you can compare the effects of market volatilities on SPDR SP 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 SPDR SP with a short position of Lyxor UCITS. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and Lyxor UCITS.

Diversification Opportunities for SPDR SP and Lyxor UCITS

-0.46

Correlation Coefficient

SPDR SP  Lyxor UCITS

Very good diversification

The 3 months correlation between SPDR and Lyxor is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 500 and Lyxor UCITS Stoxx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyxor UCITS Stoxx and SPDR SP 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 SPDR SP 500 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 Stoxx has no effect on the direction of SPDR SP i.e., SPDR SP and Lyxor UCITS go up and down completely randomly.

Pair Corralation between SPDR SP and Lyxor UCITS

Assuming the 90 days trading horizon SPDR SP is expected to generate 1.15 times less return on investment than Lyxor UCITS. But when comparing it to its historical volatility, SPDR SP 500 is 2.05 times less risky than Lyxor UCITS. It trades about 0.12 of its potential returns per unit of risk. Lyxor UCITS Stoxx is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  3,201  in Lyxor UCITS Stoxx on September 14, 2024 and sell it today you would earn a total of  2,127  from holding Lyxor UCITS Stoxx or generate 66.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.42%
Values	Daily Returns

SPDR SP 500  vs.  Lyxor UCITS Stoxx

SPDR SP 500

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP 500 are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SPDR SP sustained solid returns over the last few months and may actually be approaching a breakup point.

Lyxor UCITS Stoxx

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor UCITS Stoxx are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Lyxor UCITS is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SPDR SP and Lyxor UCITS

The main advantage of trading using opposite SPDR SP and Lyxor UCITS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP 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 SPDR SP 500 and Lyxor UCITS 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.

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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .