Correlation Between Amundi SP and Amundi Stoxx

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

Diversification Opportunities for Amundi SP and Amundi Stoxx

0.08

Correlation Coefficient

Amundi SP  Amundi Stoxx

Significant diversification

The 3 months correlation between Amundi and Amundi is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Amundi SP 500 and Amundi Stoxx Europe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amundi Stoxx Europe 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 Stoxx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amundi Stoxx Europe has no effect on the direction of Amundi SP i.e., Amundi SP and Amundi Stoxx go up and down completely randomly.

Pair Corralation between Amundi SP and Amundi Stoxx

Assuming the 90 days trading horizon Amundi SP 500 is expected to under-perform the Amundi Stoxx. In addition to that, Amundi SP is 1.24 times more volatile than Amundi Stoxx Europe. It trades about -0.02 of its total potential returns per unit of risk. Amundi Stoxx Europe is currently generating about 0.17 per unit of volatility. If you would invest  23,581  in Amundi Stoxx Europe on December 30, 2024 and sell it today you would earn a total of  1,903  from holding Amundi Stoxx Europe or generate 8.07% return on investment over 90 days.

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

Amundi SP 500  vs.  Amundi Stoxx Europe

Amundi SP 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days Amundi SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Amundi SP is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Amundi Stoxx Europe

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amundi Stoxx Europe are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Amundi Stoxx may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Amundi SP and Amundi Stoxx

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

The idea behind Amundi SP 500 and Amundi Stoxx Europe 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.