Correlation Between Lyxor MSCI and Lyxor Euro
Can any of the company-specific risk be diversified away by investing in both Lyxor MSCI and Lyxor Euro 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 MSCI and Lyxor Euro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lyxor MSCI China and Lyxor Euro Stoxx, you can compare the effects of market volatilities on Lyxor MSCI and Lyxor Euro 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 MSCI with a short position of Lyxor Euro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lyxor MSCI and Lyxor Euro.
Diversification Opportunities for Lyxor MSCI and Lyxor Euro
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Lyxor and Lyxor is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor MSCI China and Lyxor Euro Stoxx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyxor Euro Stoxx and Lyxor MSCI 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 MSCI China are associated (or correlated) with Lyxor Euro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lyxor Euro Stoxx has no effect on the direction of Lyxor MSCI i.e., Lyxor MSCI and Lyxor Euro go up and down completely randomly.
Pair Corralation between Lyxor MSCI and Lyxor Euro
Assuming the 90 days trading horizon Lyxor MSCI China is expected to generate 1.15 times more return on investment than Lyxor Euro. However, Lyxor MSCI is 1.15 times more volatile than Lyxor Euro Stoxx. It trades about 0.14 of its potential returns per unit of risk. Lyxor Euro Stoxx is currently generating about 0.09 per unit of risk. If you would invest 1,497 in Lyxor MSCI China on September 25, 2024 and sell it today you would earn a total of 71.00 from holding Lyxor MSCI China or generate 4.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Lyxor MSCI China vs. Lyxor Euro Stoxx
Performance |
| Timeline |
| Lyxor MSCI China |
| Lyxor Euro Stoxx |
Lyxor MSCI and Lyxor Euro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lyxor MSCI and Lyxor Euro
The main advantage of trading using opposite Lyxor MSCI and Lyxor Euro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lyxor MSCI position performs unexpectedly, Lyxor Euro 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 Euro will offset losses from the drop in Lyxor Euro's long position.| Lyxor MSCI vs. UBSFund Solutions MSCI | Lyxor MSCI vs. Vanguard SP 500 | Lyxor MSCI vs. iShares VII PLC | Lyxor MSCI vs. iShares Core SP |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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