Correlation Between Lyxor CAC and HSBC ETFs

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

By analyzing existing cross correlation between Lyxor CAC 40 and HSBC ETFs Public, you can compare the effects of market volatilities on Lyxor CAC and HSBC ETFs 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 CAC with a short position of HSBC ETFs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lyxor CAC and HSBC ETFs.

Diversification Opportunities for Lyxor CAC and HSBC ETFs

0.98

Correlation Coefficient

Lyxor CAC  HSBC ETFs

Almost no diversification

The 3 months correlation between Lyxor and HSBC is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor CAC 40 and HSBC ETFs Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HSBC ETFs Public and Lyxor CAC 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 CAC 40 are associated (or correlated) with HSBC ETFs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HSBC ETFs Public has no effect on the direction of Lyxor CAC i.e., Lyxor CAC and HSBC ETFs go up and down completely randomly.

Pair Corralation between Lyxor CAC and HSBC ETFs

Assuming the 90 days trading horizon Lyxor CAC is expected to generate 1.33 times less return on investment than HSBC ETFs. But when comparing it to its historical volatility, Lyxor CAC 40 is 1.07 times less risky than HSBC ETFs. It trades about 0.18 of its potential returns per unit of risk. HSBC ETFs Public is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  4,364  in HSBC ETFs Public on February 6, 2024 and sell it today you would earn a total of  859.00  from holding HSBC ETFs Public or generate 19.68% return on investment over 90 days.

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

Lyxor CAC 40  vs.  HSBC ETFs Public

Lyxor CAC 40

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor CAC 40 are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Lyxor CAC is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

HSBC ETFs Public

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with Lyxor CAC and HSBC ETFs

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

The idea behind Lyxor CAC 40 and HSBC ETFs Public 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.