Correlation Between Lyxor UCITS and SPDR Barclays

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

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

Diversification Opportunities for Lyxor UCITS and SPDR Barclays

-0.61

Correlation Coefficient

Lyxor UCITS  SPDR Barclays

Excellent diversification

The 3 months correlation between Lyxor and SPDR is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor UCITS Stoxx and SPDR Barclays Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Barclays Cap 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 Stoxx are associated (or correlated) with SPDR Barclays. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Barclays Cap has no effect on the direction of Lyxor UCITS i.e., Lyxor UCITS and SPDR Barclays go up and down completely randomly.

Pair Corralation between Lyxor UCITS and SPDR Barclays

Assuming the 90 days trading horizon Lyxor UCITS Stoxx is expected to under-perform the SPDR Barclays. In addition to that, Lyxor UCITS is 3.92 times more volatile than SPDR Barclays Cap. It trades about -0.06 of its total potential returns per unit of risk. SPDR Barclays Cap is currently generating about -0.13 per unit of volatility. If you would invest  8,917  in SPDR Barclays Cap on January 28, 2024 and sell it today you would lose (104.00) from holding SPDR Barclays Cap or give up 1.17% of portfolio value over 90 days.

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

Lyxor UCITS Stoxx  vs.  SPDR Barclays Cap

Lyxor UCITS Stoxx

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor UCITS Stoxx are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Lyxor UCITS sustained solid returns over the last few months and may actually be approaching a breakup point.

SPDR Barclays Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR Barclays Cap has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, SPDR Barclays is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lyxor UCITS and SPDR Barclays

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

The idea behind Lyxor UCITS Stoxx and SPDR Barclays Cap 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.