Can any of the company-specific risk be diversified away by investing in both Lyxor 1 and PREMIUM BRANDS 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 PREMIUM BRANDS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lyxor 1 and PREMIUM BRANDS HLDGS, you can compare the effects of market volatilities on Lyxor 1 and PREMIUM BRANDS 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 PREMIUM BRANDS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lyxor 1 and PREMIUM BRANDS.
Diversification Opportunities for Lyxor 1 and PREMIUM BRANDS
The 3 months correlation between Lyxor and PREMIUM is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor 1 and PREMIUM BRANDS HLDGS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PREMIUM BRANDS HLDGS 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 PREMIUM BRANDS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PREMIUM BRANDS HLDGS has no effect on the direction of Lyxor 1 i.e., Lyxor 1 and PREMIUM BRANDS go up and down completely randomly.
Pair Corralation between Lyxor 1 and PREMIUM BRANDS
Assuming the 90 days trading horizon Lyxor 1 is expected to generate 0.37 times more return on investment than PREMIUM BRANDS. However, Lyxor 1 is 2.68 times less risky than PREMIUM BRANDS. It trades about 0.1 of its potential returns per unit of risk. PREMIUM BRANDS HLDGS is currently generating about -0.01 per unit of risk. If you would invest 2,423 in Lyxor 1 on March 6, 2024 and sell it today you would earn a total of 39.00 from holding Lyxor 1 or generate 1.61% return on investment over 90 days.
Over the last 90 days Lyxor 1 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Lyxor 1 is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
Over the last 90 days PREMIUM BRANDS HLDGS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, PREMIUM BRANDS is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.