Correlation Between Lyxor Treasury and Lyxor UCITS
Can any of the company-specific risk be diversified away by investing in both Lyxor Treasury and Lyxor UCITS 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 Treasury and Lyxor UCITS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lyxor Treasury 10Y and Lyxor UCITS EuroMTS, you can compare the effects of market volatilities on Lyxor Treasury and Lyxor UCITS 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 Treasury with a short position of Lyxor UCITS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lyxor Treasury and Lyxor UCITS.
Diversification Opportunities for Lyxor Treasury and Lyxor UCITS
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Lyxor and Lyxor is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor Treasury 10Y and Lyxor UCITS EuroMTS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyxor UCITS EuroMTS and Lyxor Treasury 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 Treasury 10Y are associated (or correlated) with Lyxor UCITS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lyxor UCITS EuroMTS has no effect on the direction of Lyxor Treasury i.e., Lyxor Treasury and Lyxor UCITS go up and down completely randomly.
Pair Corralation between Lyxor Treasury and Lyxor UCITS
Assuming the 90 days trading horizon Lyxor Treasury 10Y is expected to generate 2.69 times more return on investment than Lyxor UCITS. However, Lyxor Treasury is 2.69 times more volatile than Lyxor UCITS EuroMTS. It trades about 0.09 of its potential returns per unit of risk. Lyxor UCITS EuroMTS is currently generating about 0.11 per unit of risk. If you would invest 9,943 in Lyxor Treasury 10Y on November 4, 2024 and sell it today you would earn a total of 115.00 from holding Lyxor Treasury 10Y or generate 1.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lyxor Treasury 10Y vs. Lyxor UCITS EuroMTS
Performance |
| Timeline |
| Lyxor Treasury 10Y |
| Lyxor UCITS EuroMTS |
Lyxor Treasury and Lyxor UCITS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lyxor Treasury and Lyxor UCITS
The main advantage of trading using opposite Lyxor Treasury and Lyxor UCITS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lyxor Treasury position performs unexpectedly, Lyxor UCITS 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 UCITS will offset losses from the drop in Lyxor UCITS's long position.The idea behind Lyxor Treasury 10Y and Lyxor UCITS EuroMTS 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.| Lyxor UCITS vs. Lyxor SP 500 | Lyxor UCITS vs. Lyxor UCITS Daily | Lyxor UCITS vs. Lyxor UCITS MSCI | Lyxor UCITS vs. Lyxor Treasury 10Y |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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