Correlation Between Xtrackers Nikkei and Lyxor BofAML
Can any of the company-specific risk be diversified away by investing in both Xtrackers Nikkei 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 Xtrackers Nikkei and Lyxor BofAML into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Xtrackers Nikkei 225 and Lyxor BofAML USD, you can compare the effects of market volatilities on Xtrackers Nikkei 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 Xtrackers Nikkei with a short position of Lyxor BofAML. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers Nikkei and Lyxor BofAML.
Diversification Opportunities for Xtrackers Nikkei and Lyxor BofAML
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Xtrackers and Lyxor is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers Nikkei 225 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 Xtrackers Nikkei 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 Xtrackers Nikkei 225 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 Xtrackers Nikkei i.e., Xtrackers Nikkei and Lyxor BofAML go up and down completely randomly.
Pair Corralation between Xtrackers Nikkei and Lyxor BofAML
Assuming the 90 days trading horizon Xtrackers Nikkei 225 is expected to generate 2.27 times more return on investment than Lyxor BofAML. However, Xtrackers Nikkei is 2.27 times more volatile than Lyxor BofAML USD. It trades about 0.05 of its potential returns per unit of risk. Lyxor BofAML USD is currently generating about 0.04 per unit of risk. If you would invest 2,038 in Xtrackers Nikkei 225 on August 31, 2024 and sell it today you would earn a total of 403.00 from holding Xtrackers Nikkei 225 or generate 19.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Xtrackers Nikkei 225 vs. Lyxor BofAML USD
Performance |
| Timeline |
| Xtrackers Nikkei 225 |
| Lyxor BofAML USD |
Xtrackers Nikkei and Lyxor BofAML Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Xtrackers Nikkei and Lyxor BofAML
The main advantage of trading using opposite Xtrackers Nikkei and Lyxor BofAML positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers Nikkei 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.| Xtrackers Nikkei vs. Xtrackers II Global | Xtrackers Nikkei vs. Xtrackers FTSE | Xtrackers Nikkei vs. Xtrackers SP 500 | Xtrackers Nikkei vs. Xtrackers MSCI |
| Lyxor BofAML vs. UBS Fund Solutions | Lyxor BofAML vs. Xtrackers II | Lyxor BofAML vs. Xtrackers Nikkei 225 | Lyxor BofAML vs. iShares VII PLC |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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