Correlation Between Amundi MSCI and Amundi PEA

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

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

Diversification Opportunities for Amundi MSCI and Amundi PEA

0.9

Correlation Coefficient

Amundi MSCI  Amundi PEA

Almost no diversification

The 3 months correlation between Amundi and Amundi is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Amundi MSCI World and Amundi PEA Eau in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amundi PEA Eau and Amundi MSCI 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 Amundi MSCI World are associated (or correlated) with Amundi PEA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amundi PEA Eau has no effect on the direction of Amundi MSCI i.e., Amundi MSCI and Amundi PEA go up and down completely randomly.

Pair Corralation between Amundi MSCI and Amundi PEA

Assuming the 90 days trading horizon Amundi MSCI World is expected to generate 1.21 times more return on investment than Amundi PEA. However, Amundi MSCI is 1.21 times more volatile than Amundi PEA Eau. It trades about 0.23 of its potential returns per unit of risk. Amundi PEA Eau is currently generating about 0.11 per unit of risk. If you would invest  75,539  in Amundi MSCI World on September 15, 2024 and sell it today you would earn a total of  13,026  from holding Amundi MSCI World or generate 17.24% return on investment over 90 days.

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

Amundi MSCI World  vs.  Amundi PEA Eau

Amundi MSCI World

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Amundi MSCI World are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Amundi MSCI sustained solid returns over the last few months and may actually be approaching a breakup point.

Amundi PEA Eau

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Amundi PEA Eau are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Amundi PEA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Amundi MSCI and Amundi PEA

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

The idea behind Amundi MSCI World and Amundi PEA Eau 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.