Correlation Between Lyxor TIPS and Lyxor BofAML
Can any of the company-specific risk be diversified away by investing in both Lyxor TIPS and Lyxor BofAML 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 TIPS and Lyxor BofAML into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lyxor TIPS DR and Lyxor BofAML USD, you can compare the effects of market volatilities on Lyxor TIPS and Lyxor BofAML 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 TIPS with a short position of Lyxor BofAML. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lyxor TIPS and Lyxor BofAML.
Diversification Opportunities for Lyxor TIPS and Lyxor BofAML
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Lyxor and Lyxor is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor TIPS DR and Lyxor BofAML USD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyxor BofAML USD and Lyxor TIPS 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 TIPS DR are associated (or correlated) with Lyxor BofAML. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lyxor BofAML USD has no effect on the direction of Lyxor TIPS i.e., Lyxor TIPS and Lyxor BofAML go up and down completely randomly.
Pair Corralation between Lyxor TIPS and Lyxor BofAML
Assuming the 90 days trading horizon Lyxor TIPS is expected to generate 1.86 times less return on investment than Lyxor BofAML. But when comparing it to its historical volatility, Lyxor TIPS DR is 1.18 times less risky than Lyxor BofAML. It trades about 0.02 of its potential returns per unit of risk. Lyxor BofAML USD is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 7,114 in Lyxor BofAML USD on September 2, 2024 and sell it today you would earn a total of 556.00 from holding Lyxor BofAML USD or generate 7.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Lyxor TIPS DR vs. Lyxor BofAML USD
Performance |
| Timeline |
| Lyxor TIPS DR |
| Lyxor BofAML USD |
Lyxor TIPS and Lyxor BofAML Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lyxor TIPS and Lyxor BofAML
The main advantage of trading using opposite Lyxor TIPS and Lyxor BofAML positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lyxor TIPS position performs unexpectedly, Lyxor BofAML 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 Lyxor BofAML will offset losses from the drop in Lyxor BofAML's long position.| Lyxor TIPS vs. UBS Fund Solutions | Lyxor TIPS vs. Vanguard Funds Public | Lyxor TIPS vs. iShares Core SP | Lyxor TIPS vs. iShares Core MSCI |
| Lyxor BofAML vs. UBS Fund Solutions | Lyxor BofAML vs. Vanguard Funds Public | Lyxor BofAML vs. iShares Core SP | Lyxor BofAML vs. iShares Core MSCI |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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