Correlation Between Amundi SP and Amundi Index

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

By analyzing existing cross correlation between Amundi SP 500 and Amundi Index Solutions, you can compare the effects of market volatilities on Amundi SP 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 Amundi SP with a short position of Amundi Index. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amundi SP and Amundi Index.

Diversification Opportunities for Amundi SP and Amundi Index

0.59

Correlation Coefficient

Amundi SP  Amundi Index

Very weak diversification

The 3 months correlation between Amundi and Amundi is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Amundi SP 500 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 Amundi SP 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 SP 500 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 Amundi SP i.e., Amundi SP and Amundi Index go up and down completely randomly.

Pair Corralation between Amundi SP and Amundi Index

Assuming the 90 days trading horizon Amundi SP is expected to generate 3.37 times less return on investment than Amundi Index. But when comparing it to its historical volatility, Amundi SP 500 is 3.17 times less risky than Amundi Index. It trades about 0.12 of its potential returns per unit of risk. Amundi Index Solutions is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  19,984  in Amundi Index Solutions on September 5, 2024 and sell it today you would earn a total of  5,201  from holding Amundi Index Solutions or generate 26.03% return on investment over 90 days.

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

Amundi SP 500  vs.  Amundi Index Solutions

Amundi SP 500

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Amundi SP 500 are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Amundi SP may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Amundi Index Solutions

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Amundi Index Solutions are ranked lower than 10 (%) 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 Amundi SP and Amundi Index

The main advantage of trading using opposite Amundi SP and Amundi Index positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amundi SP 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 Amundi SP 500 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.

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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.