Correlation Between Dow Jones and Lyxor CAC
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Lyxor CAC 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 Dow Jones and Lyxor CAC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Lyxor CAC 40, you can compare the effects of market volatilities on Dow Jones and Lyxor CAC 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 Dow Jones with a short position of Lyxor CAC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Lyxor CAC.
Diversification Opportunities for Dow Jones and Lyxor CAC
Very good diversification
The 3 months correlation between Dow and Lyxor is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Lyxor CAC 40 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyxor CAC 40 and Dow Jones 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 Dow Jones Industrial are associated (or correlated) with Lyxor CAC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lyxor CAC 40 has no effect on the direction of Dow Jones i.e., Dow Jones and Lyxor CAC go up and down completely randomly.
Pair Corralation between Dow Jones and Lyxor CAC
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.84 times more return on investment than Lyxor CAC. However, Dow Jones Industrial is 1.19 times less risky than Lyxor CAC. It trades about 0.08 of its potential returns per unit of risk. Lyxor CAC 40 is currently generating about 0.04 per unit of risk. If you would invest 3,359,634 in Dow Jones Industrial on August 27, 2024 and sell it today you would earn a total of 1,070,017 from holding Dow Jones Industrial or generate 31.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 98.22% |
| Values | Daily Returns |
Dow Jones Industrial vs. Lyxor CAC 40
Performance |
| Timeline |
Dow Jones and Lyxor CAC Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Lyxor CAC 40
Pair trading matchups for Lyxor CAC
Pair Trading with Dow Jones and Lyxor CAC
The main advantage of trading using opposite Dow Jones and Lyxor CAC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Lyxor CAC 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 CAC will offset losses from the drop in Lyxor CAC's long position.| Dow Jones vs. Meiwu Technology Co | Dow Jones vs. 17 Education Technology | Dow Jones vs. 51Talk Online Education | Dow Jones vs. Afya |
| Lyxor CAC vs. Lyxor UCITS Japan | Lyxor CAC vs. Lyxor UCITS Stoxx | Lyxor CAC vs. Xtrackers MSCI Europe | Lyxor CAC vs. SPDR SP 500 |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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