Correlation Between Amundi MSCI and Lyxor UCITS

Can any of the company-specific risk be diversified away by investing in both Amundi MSCI and Lyxor UCITS 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 Lyxor UCITS 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 Lyxor UCITS Japan, you can compare the effects of market volatilities on Amundi MSCI and Lyxor UCITS 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 Lyxor UCITS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amundi MSCI and Lyxor UCITS.

Diversification Opportunities for Amundi MSCI and Lyxor UCITS

0.68

Correlation Coefficient

Amundi MSCI  Lyxor UCITS

Poor diversification

The 3 months correlation between Amundi and Lyxor is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Amundi MSCI World and Lyxor UCITS Japan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyxor UCITS Japan 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 Lyxor UCITS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lyxor UCITS Japan has no effect on the direction of Amundi MSCI i.e., Amundi MSCI and Lyxor UCITS go up and down completely randomly.

Pair Corralation between Amundi MSCI and Lyxor UCITS

Assuming the 90 days trading horizon Amundi MSCI World is expected to generate 1.11 times more return on investment than Lyxor UCITS. However, Amundi MSCI is 1.11 times more volatile than Lyxor UCITS Japan. It trades about 0.21 of its potential returns per unit of risk. Lyxor UCITS Japan is currently generating about 0.06 per unit of risk. If you would invest  77,747  in Amundi MSCI World on September 25, 2024 and sell it today you would earn a total of  11,456  from holding Amundi MSCI World or generate 14.73% return on investment over 90 days.

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

Amundi MSCI World  vs.  Lyxor UCITS Japan

Amundi MSCI World

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Amundi MSCI World are ranked lower than 16 (%) 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.

Lyxor UCITS Japan

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor UCITS Japan are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Lyxor UCITS is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Amundi MSCI and Lyxor UCITS

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

The idea behind Amundi MSCI World and Lyxor UCITS Japan 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.