Correlation Between IShares SP and Lyxor SMI
Can any of the company-specific risk be diversified away by investing in both IShares SP and Lyxor SMI 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 IShares SP and Lyxor SMI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares SP 500 and Lyxor SMI Daily, you can compare the effects of market volatilities on IShares SP and Lyxor SMI 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 IShares SP with a short position of Lyxor SMI. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SP and Lyxor SMI.
Diversification Opportunities for IShares SP and Lyxor SMI
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between IShares and Lyxor is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP 500 and Lyxor SMI Daily in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyxor SMI Daily and IShares SP 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 iShares SP 500 are associated (or correlated) with Lyxor SMI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lyxor SMI Daily has no effect on the direction of IShares SP i.e., IShares SP and Lyxor SMI go up and down completely randomly.
Pair Corralation between IShares SP and Lyxor SMI
Assuming the 90 days trading horizon IShares SP is expected to generate 2.41 times less return on investment than Lyxor SMI. But when comparing it to its historical volatility, iShares SP 500 is 2.24 times less risky than Lyxor SMI. It trades about 0.17 of its potential returns per unit of risk. Lyxor SMI Daily is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 203.00 in Lyxor SMI Daily on August 30, 2024 and sell it today you would earn a total of 16.00 from holding Lyxor SMI Daily or generate 7.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares SP 500 vs. Lyxor SMI Daily
Performance |
| Timeline |
| iShares SP 500 |
| Lyxor SMI Daily |
IShares SP and Lyxor SMI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares SP and Lyxor SMI
The main advantage of trading using opposite IShares SP and Lyxor SMI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares SP position performs unexpectedly, Lyxor SMI 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 SMI will offset losses from the drop in Lyxor SMI's long position.| IShares SP vs. iShares Corp Bond | IShares SP vs. iShares Emerging Asia | IShares SP vs. iShares MSCI Global | IShares SP vs. iShares VII PLC |
| Lyxor SMI vs. UBSFund Solutions MSCI | Lyxor SMI vs. iShares Core SP | Lyxor SMI vs. Baloise Holding AG | Lyxor SMI vs. Autoneum Holding AG |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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