Correlation Between Amundi Index and HSBC Developed

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

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

Diversification Opportunities for Amundi Index and HSBC Developed

0.33

Correlation Coefficient

Amundi Index  HSBC Developed

Weak diversification

The 3 months correlation between Amundi and HSBC is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Amundi Index Solutions and HSBC Developed World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HSBC Developed World and Amundi Index 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 Index Solutions are associated (or correlated) with HSBC Developed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HSBC Developed World has no effect on the direction of Amundi Index i.e., Amundi Index and HSBC Developed go up and down completely randomly.

Pair Corralation between Amundi Index and HSBC Developed

Assuming the 90 days trading horizon Amundi Index Solutions is expected to generate 0.64 times more return on investment than HSBC Developed. However, Amundi Index Solutions is 1.55 times less risky than HSBC Developed. It trades about 0.22 of its potential returns per unit of risk. HSBC Developed World is currently generating about -0.03 per unit of risk. If you would invest  9,204  in Amundi Index Solutions on December 22, 2024 and sell it today you would earn a total of  914.00  from holding Amundi Index Solutions or generate 9.93% return on investment over 90 days.

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

Amundi Index Solutions  vs.  HSBC Developed World

Amundi Index Solutions

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Amundi Index Solutions are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Amundi Index may actually be approaching a critical reversion point that can send shares even higher in April 2025.

HSBC Developed World

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Amundi Index and HSBC Developed

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

The idea behind Amundi Index Solutions and HSBC Developed World 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.