Correlation Between Lyxor PEA and SPDR MSCI
Can any of the company-specific risk be diversified away by investing in both Lyxor PEA and SPDR MSCI 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 PEA and SPDR MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lyxor PEA Nasdaq and SPDR MSCI Europe, you can compare the effects of market volatilities on Lyxor PEA and SPDR MSCI 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 PEA with a short position of SPDR MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lyxor PEA and SPDR MSCI.
Diversification Opportunities for Lyxor PEA and SPDR MSCI
Very good diversification
The 3 months correlation between Lyxor and SPDR is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor PEA Nasdaq and SPDR MSCI Europe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR MSCI Europe and Lyxor PEA 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 PEA Nasdaq are associated (or correlated) with SPDR MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR MSCI Europe has no effect on the direction of Lyxor PEA i.e., Lyxor PEA and SPDR MSCI go up and down completely randomly.
Pair Corralation between Lyxor PEA and SPDR MSCI
Assuming the 90 days trading horizon Lyxor PEA Nasdaq is expected to generate 0.84 times more return on investment than SPDR MSCI. However, Lyxor PEA Nasdaq is 1.19 times less risky than SPDR MSCI. It trades about 0.2 of its potential returns per unit of risk. SPDR MSCI Europe is currently generating about -0.02 per unit of risk. If you would invest 7,558 in Lyxor PEA Nasdaq on August 28, 2024 and sell it today you would earn a total of 419.00 from holding Lyxor PEA Nasdaq or generate 5.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lyxor PEA Nasdaq vs. SPDR MSCI Europe
Performance |
| Timeline |
| Lyxor PEA Nasdaq |
| SPDR MSCI Europe |
Lyxor PEA and SPDR MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lyxor PEA and SPDR MSCI
The main advantage of trading using opposite Lyxor PEA and SPDR MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lyxor PEA position performs unexpectedly, SPDR MSCI 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 MSCI will offset losses from the drop in SPDR MSCI's long position.The idea behind Lyxor PEA Nasdaq and SPDR MSCI Europe 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 MSCI vs. SPDR MSCI Europe | SPDR MSCI vs. SPDR Barclays Cap | SPDR MSCI vs. SPDR SP 500 | SPDR MSCI vs. SPDR MSCI Europe |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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