Correlation Between IShares VII and Lyxor 1

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Can any of the company-specific risk be diversified away by investing in both IShares VII and Lyxor 1 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 IShares VII and Lyxor 1 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares VII PLC and Lyxor 1 , you can compare the effects of market volatilities on IShares VII and Lyxor 1 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 IShares VII with a short position of Lyxor 1. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares VII and Lyxor 1.

Diversification Opportunities for IShares VII and Lyxor 1

0.74
  Correlation Coefficient

Poor diversification

The 3 months correlation between IShares and Lyxor is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding iShares VII PLC and Lyxor 1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyxor 1 and IShares VII 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 iShares VII PLC are associated (or correlated) with Lyxor 1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lyxor 1 has no effect on the direction of IShares VII i.e., IShares VII and Lyxor 1 go up and down completely randomly.

Pair Corralation between IShares VII and Lyxor 1

Assuming the 90 days trading horizon iShares VII PLC is expected to generate 1.02 times more return on investment than Lyxor 1. However, IShares VII is 1.02 times more volatile than Lyxor 1 . It trades about 0.09 of its potential returns per unit of risk. Lyxor 1 is currently generating about -0.01 per unit of risk. If you would invest  19,114  in iShares VII PLC on January 17, 2024 and sell it today you would earn a total of  4,446  from holding iShares VII PLC or generate 23.26% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy99.6%
ValuesDaily Returns

iShares VII PLC  vs.  Lyxor 1

 Performance 
       Timeline  
iShares VII PLC 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in iShares VII PLC are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, IShares VII may actually be approaching a critical reversion point that can send shares even higher in May 2024.
Lyxor 1 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor 1 are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Lyxor 1 is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

IShares VII and Lyxor 1 Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with IShares VII and Lyxor 1

The main advantage of trading using opposite IShares VII and Lyxor 1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares VII position performs unexpectedly, Lyxor 1 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 1 will offset losses from the drop in Lyxor 1's long position.
The idea behind iShares VII PLC and Lyxor 1 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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.

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