Correlation Between Lyxor MSCI and Lyxor SMI
Can any of the company-specific risk be diversified away by investing in both Lyxor MSCI and Lyxor SMI 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 MSCI and Lyxor SMI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lyxor MSCI Europe and Lyxor SMI Daily, you can compare the effects of market volatilities on Lyxor MSCI and Lyxor SMI 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 MSCI with a short position of Lyxor SMI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lyxor MSCI and Lyxor SMI.
Diversification Opportunities for Lyxor MSCI and Lyxor SMI
-0.74 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Lyxor and Lyxor is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor MSCI Europe and Lyxor SMI Daily in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyxor SMI Daily and Lyxor MSCI 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 MSCI Europe are associated (or correlated) with Lyxor SMI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lyxor SMI Daily has no effect on the direction of Lyxor MSCI i.e., Lyxor MSCI and Lyxor SMI go up and down completely randomly.
Pair Corralation between Lyxor MSCI and Lyxor SMI
Assuming the 90 days trading horizon Lyxor MSCI Europe is expected to generate 34.84 times more return on investment than Lyxor SMI. However, Lyxor MSCI is 34.84 times more volatile than Lyxor SMI Daily. It trades about 0.04 of its potential returns per unit of risk. Lyxor SMI Daily is currently generating about -0.01 per unit of risk. If you would invest 3,019 in Lyxor MSCI Europe on August 31, 2024 and sell it today you would lose (2,998) from holding Lyxor MSCI Europe or give up 99.3% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lyxor MSCI Europe vs. Lyxor SMI Daily
Performance |
| Timeline |
| Lyxor MSCI Europe |
| Lyxor SMI Daily |
Lyxor MSCI and Lyxor SMI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lyxor MSCI and Lyxor SMI
The main advantage of trading using opposite Lyxor MSCI and Lyxor SMI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lyxor MSCI position performs unexpectedly, Lyxor SMI 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 SMI will offset losses from the drop in Lyxor SMI's long position.The idea behind Lyxor MSCI Europe and Lyxor SMI Daily 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
Other Complementary Tools
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
| Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Bonds Directory Find actively traded corporate debentures issued by US companies |