Correlation Between Lyxor 1 and AutoNation

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

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

Diversification Opportunities for Lyxor 1 and AutoNation

0.51

Correlation Coefficient

Lyxor 1  AutoNation

Very weak diversification

The 3 months correlation between Lyxor and AutoNation is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor 1 and AutoNation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AutoNation 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 AutoNation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AutoNation has no effect on the direction of Lyxor 1 i.e., Lyxor 1 and AutoNation go up and down completely randomly.

Pair Corralation between Lyxor 1 and AutoNation

Assuming the 90 days trading horizon Lyxor 1 is expected to generate 1.76 times less return on investment than AutoNation. But when comparing it to its historical volatility, Lyxor 1 is 1.75 times less risky than AutoNation. It trades about 0.13 of its potential returns per unit of risk. AutoNation is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  15,260  in AutoNation on April 25, 2025 and sell it today you would earn a total of  1,965  from holding AutoNation or generate 12.88% return on investment over 90 days.

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

Lyxor 1   vs.  AutoNation

Lyxor 1

Risk-Adjusted Performance

OK

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.

AutoNation

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AutoNation are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AutoNation reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lyxor 1 and AutoNation

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

The idea behind Lyxor 1 and AutoNation 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.