Correlation Between First Trust and Lyxor 10Y
Can any of the company-specific risk be diversified away by investing in both First Trust and Lyxor 10Y 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 First Trust and Lyxor 10Y into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Value and Lyxor 10Y Inflation, you can compare the effects of market volatilities on First Trust and Lyxor 10Y 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 First Trust with a short position of Lyxor 10Y. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Lyxor 10Y.
Diversification Opportunities for First Trust and Lyxor 10Y
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Lyxor is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Value and Lyxor 10Y Inflation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyxor 10Y Inflation and First Trust 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 First Trust Value are associated (or correlated) with Lyxor 10Y. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lyxor 10Y Inflation has no effect on the direction of First Trust i.e., First Trust and Lyxor 10Y go up and down completely randomly.
Pair Corralation between First Trust and Lyxor 10Y
Assuming the 90 days trading horizon First Trust Value is expected to generate 2.99 times more return on investment than Lyxor 10Y. However, First Trust is 2.99 times more volatile than Lyxor 10Y Inflation. It trades about 0.12 of its potential returns per unit of risk. Lyxor 10Y Inflation is currently generating about 0.11 per unit of risk. If you would invest 2,299 in First Trust Value on September 4, 2024 and sell it today you would earn a total of 455.00 from holding First Trust Value or generate 19.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.6% |
| Values | Daily Returns |
First Trust Value vs. Lyxor 10Y Inflation
Performance |
| Timeline |
| First Trust Value |
| Lyxor 10Y Inflation |
First Trust and Lyxor 10Y Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Lyxor 10Y
The main advantage of trading using opposite First Trust and Lyxor 10Y positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Lyxor 10Y 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 10Y will offset losses from the drop in Lyxor 10Y's long position.| First Trust vs. First Trust Large | First Trust vs. First Trust Capital | First Trust vs. First Trust Nasdaq | First Trust vs. First Trust Eurozone |
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 Stocks Directory module to find actively traded stocks across global markets.
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