Correlation Between Lyxor UCITS and IShares BRIC
Can any of the company-specific risk be diversified away by investing in both Lyxor UCITS and IShares BRIC 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 UCITS and IShares BRIC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lyxor UCITS Stoxx and iShares BRIC 50, you can compare the effects of market volatilities on Lyxor UCITS and IShares BRIC 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 UCITS with a short position of IShares BRIC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lyxor UCITS and IShares BRIC.
Diversification Opportunities for Lyxor UCITS and IShares BRIC
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Lyxor and IShares is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor UCITS Stoxx and iShares BRIC 50 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares BRIC 50 and Lyxor UCITS 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 UCITS Stoxx are associated (or correlated) with IShares BRIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares BRIC 50 has no effect on the direction of Lyxor UCITS i.e., Lyxor UCITS and IShares BRIC go up and down completely randomly.
Pair Corralation between Lyxor UCITS and IShares BRIC
Assuming the 90 days trading horizon Lyxor UCITS Stoxx is expected to generate 0.59 times more return on investment than IShares BRIC. However, Lyxor UCITS Stoxx is 1.7 times less risky than IShares BRIC. It trades about -0.1 of its potential returns per unit of risk. iShares BRIC 50 is currently generating about -0.2 per unit of risk. If you would invest 5,276 in Lyxor UCITS Stoxx on September 2, 2024 and sell it today you would lose (106.00) from holding Lyxor UCITS Stoxx or give up 2.01% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lyxor UCITS Stoxx vs. iShares BRIC 50
Performance |
| Timeline |
| Lyxor UCITS Stoxx |
| iShares BRIC 50 |
Lyxor UCITS and IShares BRIC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lyxor UCITS and IShares BRIC
The main advantage of trading using opposite Lyxor UCITS and IShares BRIC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lyxor UCITS position performs unexpectedly, IShares BRIC 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 BRIC will offset losses from the drop in IShares BRIC's long position.The idea behind Lyxor UCITS Stoxx and iShares BRIC 50 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.| IShares BRIC vs. iShares Core SP | IShares BRIC vs. iShares Core MSCI | IShares BRIC 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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