Correlation Between Lyxor UCITS and BNP Paribas

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

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

Diversification Opportunities for Lyxor UCITS and BNP Paribas

0.82

Correlation Coefficient

Lyxor UCITS  BNP Paribas

Very poor diversification

The 3 months correlation between Lyxor and BNP is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor UCITS Japan and BNP Paribas Easy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BNP Paribas Easy and Lyxor UCITS 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 UCITS Japan are associated (or correlated) with BNP Paribas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BNP Paribas Easy has no effect on the direction of Lyxor UCITS i.e., Lyxor UCITS and BNP Paribas go up and down completely randomly.

Pair Corralation between Lyxor UCITS and BNP Paribas

Assuming the 90 days trading horizon Lyxor UCITS is expected to generate 1.23 times less return on investment than BNP Paribas. In addition to that, Lyxor UCITS is 1.04 times more volatile than BNP Paribas Easy. It trades about 0.05 of its total potential returns per unit of risk. BNP Paribas Easy is currently generating about 0.07 per unit of volatility. If you would invest  12,656  in BNP Paribas Easy on February 1, 2024 and sell it today you would earn a total of  3,588  from holding BNP Paribas Easy or generate 28.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	96.43%
Values	Daily Returns

Lyxor UCITS Japan  vs.  BNP Paribas Easy

Lyxor UCITS Japan

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor UCITS Japan are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Lyxor UCITS is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

BNP Paribas Easy

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BNP Paribas Easy are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, BNP Paribas may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Lyxor UCITS and BNP Paribas

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

The idea behind Lyxor UCITS Japan and BNP Paribas Easy 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.