Correlation Between Lyxor UCITS and Invesco Markets

Can any of the company-specific risk be diversified away by investing in both Lyxor UCITS and Invesco Markets 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 Invesco Markets 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 Invesco Markets III, you can compare the effects of market volatilities on Lyxor UCITS and Invesco Markets 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 Invesco Markets. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lyxor UCITS and Invesco Markets.

Diversification Opportunities for Lyxor UCITS and Invesco Markets

0.76

Correlation Coefficient

Lyxor UCITS  Invesco Markets

Poor diversification

The 3 months correlation between Lyxor and Invesco is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor UCITS Japan and Invesco Markets III in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Markets III 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 Invesco Markets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Markets III has no effect on the direction of Lyxor UCITS i.e., Lyxor UCITS and Invesco Markets go up and down completely randomly.

Pair Corralation between Lyxor UCITS and Invesco Markets

Assuming the 90 days trading horizon Lyxor UCITS is expected to generate 4.01 times less return on investment than Invesco Markets. In addition to that, Lyxor UCITS is 1.44 times more volatile than Invesco Markets III. It trades about 0.02 of its total potential returns per unit of risk. Invesco Markets III is currently generating about 0.13 per unit of volatility. If you would invest  1,171  in Invesco Markets III on January 30, 2024 and sell it today you would earn a total of  20.00  from holding Invesco Markets III or generate 1.71% return on investment over 90 days.

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

Lyxor UCITS Japan  vs.  Invesco Markets III

Lyxor UCITS Japan

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor UCITS Japan are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lyxor UCITS may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Invesco Markets III

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Markets III are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Invesco Markets may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Lyxor UCITS and Invesco Markets

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

The idea behind Lyxor UCITS Japan and Invesco Markets III 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.