Correlation Between Lyxor Index and IShares MSCI
Can any of the company-specific risk be diversified away by investing in both Lyxor Index and IShares 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 Index and IShares MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lyxor Index Fund and iShares MSCI EM, you can compare the effects of market volatilities on Lyxor Index and IShares 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 Index with a short position of IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lyxor Index and IShares MSCI.
Diversification Opportunities for Lyxor Index and IShares MSCI
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between Lyxor and IShares is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor Index Fund and iShares MSCI EM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI EM and Lyxor Index 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 Index Fund are associated (or correlated) with IShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI EM has no effect on the direction of Lyxor Index i.e., Lyxor Index and IShares MSCI go up and down completely randomly.
Pair Corralation between Lyxor Index and IShares MSCI
Assuming the 90 days trading horizon Lyxor Index is expected to generate 6.92 times less return on investment than IShares MSCI. But when comparing it to its historical volatility, Lyxor Index Fund is 1.43 times less risky than IShares MSCI. It trades about 0.03 of its potential returns per unit of risk. iShares MSCI EM is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 3,769 in iShares MSCI EM on September 12, 2024 and sell it today you would earn a total of 331.00 from holding iShares MSCI EM or generate 8.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 98.46% |
| Values | Daily Returns |
Lyxor Index Fund vs. iShares MSCI EM
Performance |
| Timeline |
| Lyxor Index Fund |
| iShares MSCI EM |
Lyxor Index and IShares MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lyxor Index and IShares MSCI
The main advantage of trading using opposite Lyxor Index and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lyxor Index position performs unexpectedly, IShares 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 IShares MSCI will offset losses from the drop in IShares MSCI's long position.The idea behind Lyxor Index Fund and iShares MSCI EM 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 MSCI vs. iShares II Public | IShares MSCI vs. iShares Core MSCI | IShares MSCI vs. iShares SP 500 | IShares MSCI vs. iShares MSCI World |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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