Correlation Between Bayerische Motoren and Amundi CAC

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

By analyzing existing cross correlation between Bayerische Motoren Werke and Amundi CAC 40, you can compare the effects of market volatilities on Bayerische Motoren and Amundi CAC 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 Bayerische Motoren with a short position of Amundi CAC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bayerische Motoren and Amundi CAC.

Diversification Opportunities for Bayerische Motoren and Amundi CAC

0.83

Correlation Coefficient

Bayerische Motoren  Amundi CAC

Very poor diversification

The 3 months correlation between Bayerische and Amundi is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Bayerische Motoren Werke and Amundi CAC 40 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amundi CAC 40 and Bayerische Motoren 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 Bayerische Motoren Werke are associated (or correlated) with Amundi CAC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amundi CAC 40 has no effect on the direction of Bayerische Motoren i.e., Bayerische Motoren and Amundi CAC go up and down completely randomly.

Pair Corralation between Bayerische Motoren and Amundi CAC

Assuming the 90 days horizon Bayerische Motoren Werke is expected to under-perform the Amundi CAC. In addition to that, Bayerische Motoren is 2.34 times more volatile than Amundi CAC 40. It trades about -0.1 of its total potential returns per unit of risk. Amundi CAC 40 is currently generating about -0.07 per unit of volatility. If you would invest  7,665  in Amundi CAC 40 on September 3, 2024 and sell it today you would lose (344.00) from holding Amundi CAC 40 or give up 4.49% of portfolio value over 90 days.

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

Bayerische Motoren Werke  vs.  Amundi CAC 40

Bayerische Motoren Werke

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bayerische Motoren Werke has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Amundi CAC 40

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amundi CAC 40 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Amundi CAC is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bayerische Motoren and Amundi CAC

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

The idea behind Bayerische Motoren Werke and Amundi CAC 40 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.