Correlation Between Lyxor Japan and Lyxor MSCI
Can any of the company-specific risk be diversified away by investing in both Lyxor Japan and Lyxor 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 Japan and Lyxor MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lyxor Japan UCITS and Lyxor MSCI Europe, you can compare the effects of market volatilities on Lyxor Japan and Lyxor 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 Japan with a short position of Lyxor MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lyxor Japan and Lyxor MSCI.
Diversification Opportunities for Lyxor Japan and Lyxor MSCI
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between Lyxor and Lyxor is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor Japan UCITS and Lyxor MSCI Europe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyxor MSCI Europe and Lyxor Japan 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 Japan UCITS are associated (or correlated) with Lyxor MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lyxor MSCI Europe has no effect on the direction of Lyxor Japan i.e., Lyxor Japan and Lyxor MSCI go up and down completely randomly.
Pair Corralation between Lyxor Japan and Lyxor MSCI
Assuming the 90 days trading horizon Lyxor Japan UCITS is expected to generate 0.29 times more return on investment than Lyxor MSCI. However, Lyxor Japan UCITS is 3.44 times less risky than Lyxor MSCI. It trades about 0.14 of its potential returns per unit of risk. Lyxor MSCI Europe is currently generating about -0.31 per unit of risk. If you would invest 14,930 in Lyxor Japan UCITS on August 31, 2024 and sell it today you would earn a total of 376.00 from holding Lyxor Japan UCITS or generate 2.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lyxor Japan UCITS vs. Lyxor MSCI Europe
Performance |
| Timeline |
| Lyxor Japan UCITS |
| Lyxor MSCI Europe |
Lyxor Japan and Lyxor MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lyxor Japan and Lyxor MSCI
The main advantage of trading using opposite Lyxor Japan and Lyxor MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lyxor Japan position performs unexpectedly, Lyxor 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 Lyxor MSCI will offset losses from the drop in Lyxor MSCI's long position.The idea behind Lyxor Japan UCITS and Lyxor 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.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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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