Correlation Between Amundi CAC and Lyxor PEA

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

Diversification Opportunities for Amundi CAC and Lyxor PEA

-0.66

Correlation Coefficient

Amundi CAC  Lyxor PEA

Excellent diversification

The 3 months correlation between Amundi and Lyxor is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Amundi CAC 40 and Lyxor PEA Nasdaq in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyxor PEA Nasdaq 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 Lyxor PEA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lyxor PEA Nasdaq has no effect on the direction of Amundi CAC i.e., Amundi CAC and Lyxor PEA go up and down completely randomly.

Pair Corralation between Amundi CAC and Lyxor PEA

Assuming the 90 days trading horizon Amundi CAC is expected to generate 5.02 times less return on investment than Lyxor PEA. But when comparing it to its historical volatility, Amundi CAC 40 is 1.27 times less risky than Lyxor PEA. It trades about 0.03 of its potential returns per unit of risk. Lyxor PEA Nasdaq is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  4,076  in Lyxor PEA Nasdaq on September 26, 2024 and sell it today you would earn a total of  4,241  from holding Lyxor PEA Nasdaq or generate 104.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Amundi CAC 40  vs.  Lyxor PEA Nasdaq

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.

Lyxor PEA Nasdaq

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor PEA Nasdaq are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lyxor PEA sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amundi CAC and Lyxor PEA

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

The idea behind Amundi CAC 40 and Lyxor PEA Nasdaq 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.