Correlation Between Amundi CAC and Gold Bullion

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

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

Diversification Opportunities for Amundi CAC and Gold Bullion

0.84

Correlation Coefficient

Amundi CAC  Gold Bullion

Very poor diversification

The 3 months correlation between Amundi and Gold is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Amundi CAC 40 and Gold Bullion Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Bullion Securities and Amundi CAC 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 CAC 40 are associated (or correlated) with Gold Bullion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Bullion Securities has no effect on the direction of Amundi CAC i.e., Amundi CAC and Gold Bullion go up and down completely randomly.

Pair Corralation between Amundi CAC and Gold Bullion

Assuming the 90 days trading horizon Amundi CAC is expected to generate 1.61 times less return on investment than Gold Bullion. But when comparing it to its historical volatility, Amundi CAC 40 is 1.03 times less risky than Gold Bullion. It trades about 0.15 of its potential returns per unit of risk. Gold Bullion Securities is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  22,970  in Gold Bullion Securities on December 29, 2024 and sell it today you would earn a total of  3,148  from holding Gold Bullion Securities or generate 13.7% return on investment over 90 days.

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

Amundi CAC 40  vs.  Gold Bullion Securities

Amundi CAC 40

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amundi CAC 40 are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile fundamental indicators, Amundi CAC may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Gold Bullion Securities

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Gold Bullion Securities are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Gold Bullion sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amundi CAC and Gold Bullion

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

The idea behind Amundi CAC 40 and Gold Bullion Securities 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.