Correlation Between Lyxor 1 and China Overseas

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

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

Diversification Opportunities for Lyxor 1 and China Overseas

-0.48

Correlation Coefficient

Lyxor 1  China Overseas

Very good diversification

The 3 months correlation between Lyxor and China is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor 1 and China Overseas Land in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Overseas Land and Lyxor 1 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 Lyxor 1 are associated (or correlated) with China Overseas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Overseas Land has no effect on the direction of Lyxor 1 i.e., Lyxor 1 and China Overseas go up and down completely randomly.

Pair Corralation between Lyxor 1 and China Overseas

Assuming the 90 days trading horizon Lyxor 1 is expected to generate 0.45 times more return on investment than China Overseas. However, Lyxor 1 is 2.21 times less risky than China Overseas. It trades about 0.22 of its potential returns per unit of risk. China Overseas Land is currently generating about -0.05 per unit of risk. If you would invest  2,490  in Lyxor 1 on April 22, 2025 and sell it today you would earn a total of  361.00  from holding Lyxor 1 or generate 14.5% return on investment over 90 days.

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

Lyxor 1   vs.  China Overseas Land

Lyxor 1

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor 1 are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Lyxor 1 reported solid returns over the last few months and may actually be approaching a breakup point.

China Overseas Land

Risk-Adjusted Performance

Very Weak

Over the last 90 days China Overseas Land has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Lyxor 1 and China Overseas

The main advantage of trading using opposite Lyxor 1 and China Overseas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lyxor 1 position performs unexpectedly, China Overseas 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 China Overseas will offset losses from the drop in China Overseas' long position.

The idea behind Lyxor 1 and China Overseas Land 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.

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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 Stocks Directory module to find actively traded stocks across global markets.