Correlation Between Lyxor Index and SPDR MSCI
Can any of the company-specific risk be diversified away by investing in both Lyxor Index and SPDR MSCI 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 Index and SPDR MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lyxor Index Fund and SPDR MSCI Europe, you can compare the effects of market volatilities on Lyxor Index and SPDR MSCI 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 Index with a short position of SPDR MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lyxor Index and SPDR MSCI.
Diversification Opportunities for Lyxor Index and SPDR MSCI
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lyxor and SPDR is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor Index Fund and SPDR MSCI Europe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR MSCI Europe and Lyxor Index 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 Index Fund are associated (or correlated) with SPDR MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR MSCI Europe has no effect on the direction of Lyxor Index i.e., Lyxor Index and SPDR MSCI go up and down completely randomly.
Pair Corralation between Lyxor Index and SPDR MSCI
Assuming the 90 days trading horizon Lyxor Index Fund is expected to under-perform the SPDR MSCI. But the etf apears to be less risky and, when comparing its historical volatility, Lyxor Index Fund is 1.29 times less risky than SPDR MSCI. The etf trades about -0.21 of its potential returns per unit of risk. The SPDR MSCI Europe is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 12,998 in SPDR MSCI Europe on August 28, 2024 and sell it today you would lose (138.00) from holding SPDR MSCI Europe or give up 1.06% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lyxor Index Fund vs. SPDR MSCI Europe
Performance |
| Timeline |
| Lyxor Index Fund |
| SPDR MSCI Europe |
Lyxor Index and SPDR MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lyxor Index and SPDR MSCI
The main advantage of trading using opposite Lyxor Index and SPDR MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lyxor Index position performs unexpectedly, SPDR MSCI 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 SPDR MSCI will offset losses from the drop in SPDR MSCI's long position.The idea behind Lyxor Index Fund and SPDR MSCI Europe 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.| SPDR MSCI vs. SPDR MSCI Europe | SPDR MSCI vs. SPDR Barclays Cap | SPDR MSCI vs. SPDR SP 500 | SPDR MSCI vs. SPDR MSCI Europe |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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