Correlation Between Lyxor Japan and Invesco FTSE
Can any of the company-specific risk be diversified away by investing in both Lyxor Japan and Invesco 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 Japan and Invesco FTSE 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 Invesco FTSE RAFI, you can compare the effects of market volatilities on Lyxor Japan and Invesco 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 Japan with a short position of Invesco FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lyxor Japan and Invesco FTSE.
Diversification Opportunities for Lyxor Japan and Invesco FTSE
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lyxor and Invesco is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor Japan UCITS and Invesco FTSE RAFI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco FTSE RAFI 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 Invesco FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco FTSE RAFI has no effect on the direction of Lyxor Japan i.e., Lyxor Japan and Invesco FTSE go up and down completely randomly.
Pair Corralation between Lyxor Japan and Invesco FTSE
Assuming the 90 days trading horizon Lyxor Japan is expected to generate 1.37 times less return on investment than Invesco FTSE. In addition to that, Lyxor Japan is 1.23 times more volatile than Invesco FTSE RAFI. It trades about 0.06 of its total potential returns per unit of risk. Invesco FTSE RAFI is currently generating about 0.1 per unit of volatility. If you would invest 2,327 in Invesco FTSE RAFI on August 31, 2024 and sell it today you would earn a total of 590.00 from holding Invesco FTSE RAFI or generate 25.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 70.81% |
| Values | Daily Returns |
Lyxor Japan UCITS vs. Invesco FTSE RAFI
Performance |
| Timeline |
| Lyxor Japan UCITS |
| Invesco FTSE RAFI |
Lyxor Japan and Invesco FTSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lyxor Japan and Invesco FTSE
The main advantage of trading using opposite Lyxor Japan and Invesco FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lyxor Japan position performs unexpectedly, Invesco 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 Invesco FTSE will offset losses from the drop in Invesco FTSE's long position.The idea behind Lyxor Japan UCITS and Invesco FTSE RAFI 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.| Invesco FTSE vs. iShares Core SP | Invesco FTSE vs. iShares Core MSCI | Invesco FTSE vs. Lyxor UCITS Stoxx |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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