Correlation Between Lyxor 1 and British American
Can any of the company-specific risk be diversified away by investing in both Lyxor 1 and British American 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 1 and British American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lyxor 1 and British American Tobacco, you can compare the effects of market volatilities on Lyxor 1 and British American 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 1 with a short position of British American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lyxor 1 and British American.
Diversification Opportunities for Lyxor 1 and British American
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Lyxor and British is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor 1 and British American Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on British American Tobacco and Lyxor 1 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 1 are associated (or correlated) with British American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of British American Tobacco has no effect on the direction of Lyxor 1 i.e., Lyxor 1 and British American go up and down completely randomly.
Pair Corralation between Lyxor 1 and British American
Assuming the 90 days trading horizon Lyxor 1 is expected to generate 12.92 times less return on investment than British American. But when comparing it to its historical volatility, Lyxor 1 is 1.18 times less risky than British American. It trades about 0.02 of its potential returns per unit of risk. British American Tobacco is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 2,767 in British American Tobacco on September 1, 2024 and sell it today you would earn a total of 814.00 from holding British American Tobacco or generate 29.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.24% |
| Values | Daily Returns |
Lyxor 1 vs. British American Tobacco
Performance |
| Timeline |
| Lyxor 1 |
| British American Tobacco |
Lyxor 1 and British American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lyxor 1 and British American
The main advantage of trading using opposite Lyxor 1 and British American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lyxor 1 position performs unexpectedly, British American 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 British American will offset losses from the drop in British American's long position.| Lyxor 1 vs. Lyxor Fed Funds | Lyxor 1 vs. Lyxor BofAML USD | Lyxor 1 vs. Lyxor 1 TecDAX | Lyxor 1 vs. Lyxor UCITS EuroMTS |
| British American vs. SERI INDUSTRIAL EO | British American vs. SALESFORCE INC CDR | British American vs. Perseus Mining Limited | British American vs. Evolution Mining Limited |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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