Correlation Between Lyxor SMI and IShares Govt
Can any of the company-specific risk be diversified away by investing in both Lyxor SMI and IShares Govt 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 SMI and IShares Govt into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lyxor SMI Daily and iShares Govt Bond, you can compare the effects of market volatilities on Lyxor SMI and IShares Govt 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 SMI with a short position of IShares Govt. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lyxor SMI and IShares Govt.
Diversification Opportunities for Lyxor SMI and IShares Govt
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Lyxor and IShares is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor SMI Daily and iShares Govt Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Govt Bond and Lyxor SMI 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 SMI Daily are associated (or correlated) with IShares Govt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Govt Bond has no effect on the direction of Lyxor SMI i.e., Lyxor SMI and IShares Govt go up and down completely randomly.
Pair Corralation between Lyxor SMI and IShares Govt
Assuming the 90 days trading horizon Lyxor SMI Daily is expected to generate 2.48 times more return on investment than IShares Govt. However, Lyxor SMI is 2.48 times more volatile than iShares Govt Bond. It trades about 0.13 of its potential returns per unit of risk. iShares Govt Bond is currently generating about -0.08 per unit of risk. If you would invest 201.00 in Lyxor SMI Daily on August 30, 2024 and sell it today you would earn a total of 18.00 from holding Lyxor SMI Daily or generate 8.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 86.36% |
| Values | Daily Returns |
Lyxor SMI Daily vs. iShares Govt Bond
Performance |
| Timeline |
| Lyxor SMI Daily |
| iShares Govt Bond |
Lyxor SMI and IShares Govt Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lyxor SMI and IShares Govt
The main advantage of trading using opposite Lyxor SMI and IShares Govt positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lyxor SMI position performs unexpectedly, IShares Govt 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 IShares Govt will offset losses from the drop in IShares Govt's long position.| Lyxor SMI vs. UBSFund Solutions MSCI | Lyxor SMI vs. iShares Core SP | Lyxor SMI vs. Baloise Holding AG | Lyxor SMI vs. Autoneum Holding AG |
| IShares Govt vs. UBSFund Solutions MSCI | IShares Govt vs. iShares Core SP | IShares Govt vs. Baloise Holding AG | IShares Govt vs. Autoneum Holding AG |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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