Correlation Between Lyxor 1 and Diageo Plc

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

By analyzing existing cross correlation between Lyxor 1 and Diageo plc, you can compare the effects of market volatilities on Lyxor 1 and Diageo Plc 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 Diageo Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lyxor 1 and Diageo Plc.

Diversification Opportunities for Lyxor 1 and Diageo Plc

-0.37

Correlation Coefficient

Lyxor 1  Diageo Plc

Very good diversification

The 3 months correlation between Lyxor and Diageo is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor 1 and Diageo plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diageo plc 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 Diageo Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diageo plc has no effect on the direction of Lyxor 1 i.e., Lyxor 1 and Diageo Plc go up and down completely randomly.

Pair Corralation between Lyxor 1 and Diageo Plc

Assuming the 90 days trading horizon Lyxor 1 is expected to generate 0.58 times more return on investment than Diageo Plc. However, Lyxor 1 is 1.71 times less risky than Diageo Plc. It trades about 0.14 of its potential returns per unit of risk. Diageo plc is currently generating about -0.12 per unit of risk. If you would invest  2,604  in Lyxor 1 on April 24, 2025 and sell it today you would earn a total of  205.00  from holding Lyxor 1 or generate 7.87% return on investment over 90 days.

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

Lyxor 1   vs.  Diageo plc

Lyxor 1

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor 1 are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Lyxor 1 may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Diageo plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Diageo plc 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 Diageo Plc

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

The idea behind Lyxor 1 and Diageo plc 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.