Correlation Between Dow Jones and Lyxor UCITS
Can any of the company-specific risk be diversified away by investing in both Dow Jones 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 Dow Jones and Lyxor UCITS 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 UCITS iBoxx, you can compare the effects of market volatilities on Dow Jones 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 Dow Jones with a short position of Lyxor UCITS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Lyxor UCITS.
Diversification Opportunities for Dow Jones and Lyxor UCITS
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dow and Lyxor is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Lyxor UCITS iBoxx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyxor UCITS iBoxx 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 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 iBoxx has no effect on the direction of Dow Jones i.e., Dow Jones and Lyxor UCITS go up and down completely randomly.
Pair Corralation between Dow Jones and Lyxor UCITS
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 2.18 times more return on investment than Lyxor UCITS. However, Dow Jones is 2.18 times more volatile than Lyxor UCITS iBoxx. It trades about 0.12 of its potential returns per unit of risk. Lyxor UCITS iBoxx is currently generating about 0.11 per unit of risk. If you would invest 3,624,550 in Dow Jones Industrial on August 27, 2024 and sell it today you would earn a total of 805,101 from holding Dow Jones Industrial or generate 22.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 98.8% |
| Values | Daily Returns |
Dow Jones Industrial vs. Lyxor UCITS iBoxx
Performance |
| Timeline |
Dow Jones and Lyxor UCITS Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Lyxor UCITS iBoxx
Pair trading matchups for Lyxor UCITS
Pair Trading with Dow Jones and Lyxor UCITS
The main advantage of trading using opposite Dow Jones and Lyxor UCITS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones 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.| Dow Jones vs. MI Homes | Dow Jones vs. Franklin Street Properties | Dow Jones vs. Summit Hotel Properties | Dow Jones vs. Portillos |
| Lyxor UCITS vs. Lyxor SP 500 | Lyxor UCITS vs. Lyxor UCITS Daily | Lyxor UCITS vs. Lyxor UCITS MSCI | Lyxor UCITS vs. Lyxor Treasury 10Y |
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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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