Correlation Between Xtrackers and Lyxor 1

Can any of the company-specific risk be diversified away by investing in both Xtrackers 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 Xtrackers and Lyxor 1 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Xtrackers II and Lyxor 1 , you can compare the effects of market volatilities on Xtrackers 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 Xtrackers with a short position of Lyxor 1. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers and Lyxor 1.

Diversification Opportunities for Xtrackers and Lyxor 1

-0.65

Correlation Coefficient

Xtrackers  Lyxor 1

Excellent diversification

The 3 months correlation between Xtrackers and Lyxor is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers II and Lyxor 1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyxor 1 and Xtrackers 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 II 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 Xtrackers i.e., Xtrackers and Lyxor 1 go up and down completely randomly.

Pair Corralation between Xtrackers and Lyxor 1

Assuming the 90 days trading horizon Xtrackers II is expected to under-perform the Lyxor 1. But the etf apears to be less risky and, when comparing its historical volatility, Xtrackers II is 1.28 times less risky than Lyxor 1. The etf trades about -0.03 of its potential returns per unit of risk. The Lyxor 1 is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2,341  in Lyxor 1 on July 8, 2024 and sell it today you would earn a total of  72.00  from holding Lyxor 1 or generate 3.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Xtrackers II   vs.  Lyxor 1

Xtrackers II

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers II are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Xtrackers may actually be approaching a critical reversion point that can send shares even higher in November 2024.

Lyxor 1

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lyxor 1 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Lyxor 1 is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Xtrackers and Lyxor 1

The main advantage of trading using opposite Xtrackers and Lyxor 1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers 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 Xtrackers II 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.