Correlation Between SPDR MSCI and Lyxor MSCI
Can any of the company-specific risk be diversified away by investing in both SPDR MSCI and Lyxor 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 SPDR MSCI and Lyxor MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR MSCI World and Lyxor MSCI India, you can compare the effects of market volatilities on SPDR MSCI and Lyxor 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 SPDR MSCI with a short position of Lyxor MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR MSCI and Lyxor MSCI.
Diversification Opportunities for SPDR MSCI and Lyxor MSCI
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between SPDR and Lyxor is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding SPDR MSCI World and Lyxor MSCI India in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyxor MSCI India and SPDR MSCI 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 SPDR MSCI World are associated (or correlated) with Lyxor MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lyxor MSCI India has no effect on the direction of SPDR MSCI i.e., SPDR MSCI and Lyxor MSCI go up and down completely randomly.
Pair Corralation between SPDR MSCI and Lyxor MSCI
Assuming the 90 days trading horizon SPDR MSCI World is expected to generate 1.25 times more return on investment than Lyxor MSCI. However, SPDR MSCI is 1.25 times more volatile than Lyxor MSCI India. It trades about 0.11 of its potential returns per unit of risk. Lyxor MSCI India is currently generating about 0.07 per unit of risk. If you would invest 12,856 in SPDR MSCI World on September 2, 2024 and sell it today you would earn a total of 4,872 from holding SPDR MSCI World or generate 37.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR MSCI World vs. Lyxor MSCI India
Performance |
| Timeline |
| SPDR MSCI World |
| Lyxor MSCI India |
SPDR MSCI and Lyxor MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR MSCI and Lyxor MSCI
The main advantage of trading using opposite SPDR MSCI and Lyxor MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR MSCI position performs unexpectedly, Lyxor 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 Lyxor MSCI will offset losses from the drop in Lyxor MSCI's long position.The idea behind SPDR MSCI World and Lyxor MSCI India 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.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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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