Correlation Between Lyxor MSCI and SPDR FTSE
Can any of the company-specific risk be diversified away by investing in both Lyxor MSCI and SPDR FTSE 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 SPDR FTSE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lyxor MSCI India and SPDR FTSE UK, you can compare the effects of market volatilities on Lyxor MSCI and SPDR FTSE 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 SPDR FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lyxor MSCI and SPDR FTSE.
Diversification Opportunities for Lyxor MSCI and SPDR FTSE
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lyxor and SPDR is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor MSCI India and SPDR FTSE UK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR FTSE UK 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 India are associated (or correlated) with SPDR FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR FTSE UK has no effect on the direction of Lyxor MSCI i.e., Lyxor MSCI and SPDR FTSE go up and down completely randomly.
Pair Corralation between Lyxor MSCI and SPDR FTSE
Assuming the 90 days trading horizon Lyxor MSCI India is expected to generate 0.4 times more return on investment than SPDR FTSE. However, Lyxor MSCI India is 2.49 times less risky than SPDR FTSE. It trades about 0.08 of its potential returns per unit of risk. SPDR FTSE UK is currently generating about 0.02 per unit of risk. If you would invest 2,448 in Lyxor MSCI India on September 12, 2024 and sell it today you would earn a total of 929.00 from holding Lyxor MSCI India or generate 37.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lyxor MSCI India vs. SPDR FTSE UK
Performance |
| Timeline |
| Lyxor MSCI India |
| SPDR FTSE UK |
Lyxor MSCI and SPDR FTSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lyxor MSCI and SPDR FTSE
The main advantage of trading using opposite Lyxor MSCI and SPDR FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lyxor MSCI position performs unexpectedly, SPDR FTSE 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 FTSE will offset losses from the drop in SPDR FTSE's long position.The idea behind Lyxor MSCI India and SPDR FTSE UK 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 FTSE vs. SPDR MSCI Europe | SPDR FTSE vs. SPDR SP Utilities | SPDR FTSE vs. SPDR MSCI Europe | SPDR FTSE vs. SPDR MSCI EM |
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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