Correlation Between UST Inc and Lyxor UCITS

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

By analyzing existing cross correlation between Multi Units Luxembourg and Lyxor UCITS NASDAQ 100, you can compare the effects of market volatilities on UST Inc 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 UST Inc with a short position of Lyxor UCITS. Check out your portfolio center. Please also check ongoing floating volatility patterns of UST Inc and Lyxor UCITS.

Diversification Opportunities for UST Inc and Lyxor UCITS

0.99

Correlation Coefficient

UST Inc  Lyxor UCITS

No risk reduction

The 3 months correlation between UST and Lyxor is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Multi Units Luxembourg and Lyxor UCITS NASDAQ 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyxor UCITS NASDAQ and UST Inc 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 Multi Units Luxembourg 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 NASDAQ has no effect on the direction of UST Inc i.e., UST Inc and Lyxor UCITS go up and down completely randomly.

Pair Corralation between UST Inc and Lyxor UCITS

Assuming the 90 days trading horizon UST Inc is expected to generate 1.7 times less return on investment than Lyxor UCITS. But when comparing it to its historical volatility, Multi Units Luxembourg is 1.96 times less risky than Lyxor UCITS. It trades about 0.13 of its potential returns per unit of risk. Lyxor UCITS NASDAQ 100 is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  67,040  in Lyxor UCITS NASDAQ 100 on September 12, 2024 and sell it today you would earn a total of  63,840  from holding Lyxor UCITS NASDAQ 100 or generate 95.23% return on investment over 90 days.

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

Multi Units Luxembourg   vs.  Lyxor UCITS NASDAQ 100

Multi Units Luxembourg

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Multi Units Luxembourg are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, UST Inc sustained solid returns over the last few months and may actually be approaching a breakup point.

Lyxor UCITS NASDAQ

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor UCITS NASDAQ 100 are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lyxor UCITS sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with UST Inc and Lyxor UCITS

The main advantage of trading using opposite UST Inc and Lyxor UCITS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UST Inc 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 Multi Units Luxembourg and Lyxor UCITS NASDAQ 100 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.