Correlation Between Lyxor MSCI and Vanguard
Can any of the company-specific risk be diversified away by investing in both Lyxor MSCI and Vanguard 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 Vanguard 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 Vanguard SP 500, you can compare the effects of market volatilities on Lyxor MSCI and Vanguard 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 Vanguard. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lyxor MSCI and Vanguard.
Diversification Opportunities for Lyxor MSCI and Vanguard
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Lyxor and Vanguard is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor MSCI Europe and Vanguard SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard SP 500 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 Vanguard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard SP 500 has no effect on the direction of Lyxor MSCI i.e., Lyxor MSCI and Vanguard go up and down completely randomly.
Pair Corralation between Lyxor MSCI and Vanguard
Assuming the 90 days trading horizon Lyxor MSCI Europe is expected to under-perform the Vanguard. In addition to that, Lyxor MSCI is 2.52 times more volatile than Vanguard SP 500. It trades about -0.31 of its total potential returns per unit of risk. Vanguard SP 500 is currently generating about 0.19 per unit of volatility. If you would invest 9,599 in Vanguard SP 500 on August 31, 2024 and sell it today you would earn a total of 497.00 from holding Vanguard SP 500 or generate 5.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Lyxor MSCI Europe vs. Vanguard SP 500
Performance |
| Timeline |
| Lyxor MSCI Europe |
| Vanguard SP 500 |
Lyxor MSCI and Vanguard Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lyxor MSCI and Vanguard
The main advantage of trading using opposite Lyxor MSCI and Vanguard positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lyxor MSCI position performs unexpectedly, Vanguard 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 Vanguard will offset losses from the drop in Vanguard's long position.The idea behind Lyxor MSCI Europe and Vanguard SP 500 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.| Vanguard vs. UBSFund Solutions MSCI | Vanguard vs. iShares Core SP | Vanguard vs. iShares Core MSCI | Vanguard vs. Lyxor UCITS Stoxx |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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