Correlation Between Microsoft and Amundi Index

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

By analyzing existing cross correlation between Microsoft and Amundi Index Solutions, you can compare the effects of market volatilities on Microsoft and Amundi Index 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 Microsoft with a short position of Amundi Index. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Amundi Index.

Diversification Opportunities for Microsoft and Amundi Index

0.28

Correlation Coefficient

Microsoft  Amundi Index

Modest diversification

The 3 months correlation between Microsoft and Amundi is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Amundi Index Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amundi Index Solutions and Microsoft 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 Microsoft are associated (or correlated) with Amundi Index. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amundi Index Solutions has no effect on the direction of Microsoft i.e., Microsoft and Amundi Index go up and down completely randomly.

Pair Corralation between Microsoft and Amundi Index

Given the investment horizon of 90 days Microsoft is expected to generate 2.45 times less return on investment than Amundi Index. In addition to that, Microsoft is 1.67 times more volatile than Amundi Index Solutions. It trades about 0.07 of its total potential returns per unit of risk. Amundi Index Solutions is currently generating about 0.28 per unit of volatility. If you would invest  9,925  in Amundi Index Solutions on September 18, 2024 and sell it today you would earn a total of  1,433  from holding Amundi Index Solutions or generate 14.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.92%
Values	Daily Returns

Microsoft  vs.  Amundi Index Solutions

Microsoft

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Microsoft is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Amundi Index Solutions

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Amundi Index Solutions are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Amundi Index sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and Amundi Index

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

The idea behind Microsoft and Amundi Index Solutions 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.

Check out your portfolio center.

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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.