Correlation Between Amundi Label and ALM ES

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

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

Diversification Opportunities for Amundi Label and ALM ES

0.08

Correlation Coefficient

Amundi Label  ALM ES

Significant diversification

The 3 months correlation between Amundi and ALM is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Amundi Label Actions and ALM ES Actions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALM ES Actions and Amundi Label 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 Label Actions are associated (or correlated) with ALM ES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALM ES Actions has no effect on the direction of Amundi Label i.e., Amundi Label and ALM ES go up and down completely randomly.

Pair Corralation between Amundi Label and ALM ES

Assuming the 90 days trading horizon Amundi Label Actions is expected to generate 1.01 times more return on investment than ALM ES. However, Amundi Label is 1.01 times more volatile than ALM ES Actions. It trades about 0.1 of its potential returns per unit of risk. ALM ES Actions is currently generating about 0.07 per unit of risk. If you would invest  30,271  in Amundi Label Actions on October 25, 2024 and sell it today you would earn a total of  1,274  from holding Amundi Label Actions or generate 4.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.31%
Values	Daily Returns

Amundi Label Actions  vs.  ALM ES Actions

Amundi Label Actions

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Amundi Label Actions are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong basic indicators, Amundi Label is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

ALM ES Actions

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ALM ES Actions are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of very healthy basic indicators, ALM ES is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Amundi Label and ALM ES

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

The idea behind Amundi Label Actions and ALM ES Actions 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.