Correlation Between Amundi Index and HSBC Emerging

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

Diversification Opportunities for Amundi Index and HSBC Emerging

0.41

Correlation Coefficient

Amundi Index  HSBC Emerging

Very weak diversification

The 3 months correlation between Amundi and HSBC is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Amundi Index Solutions and HSBC Emerging Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HSBC Emerging Market 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 Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HSBC Emerging Market has no effect on the direction of Amundi Index i.e., Amundi Index and HSBC Emerging go up and down completely randomly.

Pair Corralation between Amundi Index and HSBC Emerging

Assuming the 90 days trading horizon Amundi Index Solutions is expected to under-perform the HSBC Emerging. In addition to that, Amundi Index is 1.07 times more volatile than HSBC Emerging Market. It trades about -0.1 of its total potential returns per unit of risk. HSBC Emerging Market is currently generating about -0.01 per unit of volatility. If you would invest  1,474  in HSBC Emerging Market on December 29, 2024 and sell it today you would lose (15.00) from holding HSBC Emerging Market or give up 1.02% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Amundi Index Solutions  vs.  HSBC Emerging Market

Amundi Index Solutions

Risk-Adjusted Performance

Very Weak

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

HSBC Emerging Market

Risk-Adjusted Performance

Very Weak

Over the last 90 days HSBC Emerging Market has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, HSBC Emerging 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 Emerging

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

The idea behind Amundi Index Solutions and HSBC Emerging Market 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.