Correlation Between Lyxor UCITS and Multi Units

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Can any of the company-specific risk be diversified away by investing in both Lyxor UCITS and Multi Units 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 UCITS and Multi Units into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lyxor UCITS Japan and Multi Units Luxembourg, you can compare the effects of market volatilities on Lyxor UCITS and Multi Units 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 UCITS with a short position of Multi Units. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lyxor UCITS and Multi Units.

Diversification Opportunities for Lyxor UCITS and Multi Units

0.7
  Correlation Coefficient

Poor diversification

The 3 months correlation between Lyxor and Multi is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor UCITS Japan and Multi Units Luxembourg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multi Units Luxembourg and Lyxor UCITS 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 UCITS Japan are associated (or correlated) with Multi Units. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multi Units Luxembourg has no effect on the direction of Lyxor UCITS i.e., Lyxor UCITS and Multi Units go up and down completely randomly.

Pair Corralation between Lyxor UCITS and Multi Units

Assuming the 90 days trading horizon Lyxor UCITS Japan is expected to generate 3.64 times more return on investment than Multi Units. However, Lyxor UCITS is 3.64 times more volatile than Multi Units Luxembourg. It trades about 0.07 of its potential returns per unit of risk. Multi Units Luxembourg is currently generating about 0.09 per unit of risk. If you would invest  13,401  in Lyxor UCITS Japan on September 12, 2024 and sell it today you would earn a total of  3,293  from holding Lyxor UCITS Japan or generate 24.57% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Lyxor UCITS Japan  vs.  Multi Units Luxembourg

 Performance 
       Timeline  
Lyxor UCITS Japan 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor UCITS Japan are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Lyxor UCITS is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Multi Units Luxembourg 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Multi Units Luxembourg are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, Multi Units is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Lyxor UCITS and Multi Units Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Lyxor UCITS and Multi Units

The main advantage of trading using opposite Lyxor UCITS and Multi Units positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lyxor UCITS position performs unexpectedly, Multi Units 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 Multi Units will offset losses from the drop in Multi Units' long position.
The idea behind Lyxor UCITS Japan and Multi Units Luxembourg 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.
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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.

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