Correlation Between WisdomTree and Lyxor MSCI

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

By analyzing existing cross correlation between WisdomTree SP 500 and Lyxor MSCI World, you can compare the effects of market volatilities on WisdomTree 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 WisdomTree with a short position of Lyxor MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree and Lyxor MSCI.

Diversification Opportunities for WisdomTree and Lyxor MSCI

1.0

Correlation Coefficient

WisdomTree  Lyxor MSCI

No risk reduction

The 3 months correlation between WisdomTree and Lyxor is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree SP 500 and Lyxor MSCI World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyxor MSCI World and WisdomTree 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 WisdomTree SP 500 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 World has no effect on the direction of WisdomTree i.e., WisdomTree and Lyxor MSCI go up and down completely randomly.

Pair Corralation between WisdomTree and Lyxor MSCI

Assuming the 90 days trading horizon WisdomTree SP 500 is expected to generate 1.88 times more return on investment than Lyxor MSCI. However, WisdomTree is 1.88 times more volatile than Lyxor MSCI World. It trades about 0.28 of its potential returns per unit of risk. Lyxor MSCI World is currently generating about 0.33 per unit of risk. If you would invest  603,400  in WisdomTree SP 500 on April 24, 2025 and sell it today you would earn a total of  286,900  from holding WisdomTree SP 500 or generate 47.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

WisdomTree SP 500  vs.  Lyxor MSCI World

WisdomTree SP 500

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree SP 500 are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, WisdomTree unveiled solid returns over the last few months and may actually be approaching a breakup point.

Lyxor MSCI World

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor MSCI World are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Lyxor MSCI unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with WisdomTree and Lyxor MSCI

The main advantage of trading using opposite WisdomTree and Lyxor MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree 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 WisdomTree SP 500 and Lyxor MSCI World 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .