Correlation Between Dow Jones and Amundi MSCI

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

By analyzing existing cross correlation between Dow Jones Industrial and Amundi MSCI Europe, you can compare the effects of market volatilities on Dow Jones and Amundi MSCI 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 Dow Jones with a short position of Amundi MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Amundi MSCI.

Diversification Opportunities for Dow Jones and Amundi MSCI

0.25

Correlation Coefficient

Dow Jones  Amundi MSCI

Modest diversification

The 3 months correlation between Dow and Amundi is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Amundi MSCI Europe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amundi MSCI Europe and Dow Jones 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 Dow Jones Industrial are associated (or correlated) with Amundi MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amundi MSCI Europe has no effect on the direction of Dow Jones i.e., Dow Jones and Amundi MSCI go up and down completely randomly.

Pair Corralation between Dow Jones and Amundi MSCI

Assuming the 90 days trading horizon Dow Jones Industrial is expected to under-perform the Amundi MSCI. In addition to that, Dow Jones is 1.09 times more volatile than Amundi MSCI Europe. It trades about -0.01 of its total potential returns per unit of risk. Amundi MSCI Europe is currently generating about 0.12 per unit of volatility. If you would invest  7,782  in Amundi MSCI Europe on December 28, 2024 and sell it today you would earn a total of  456.00  from holding Amundi MSCI Europe or generate 5.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.77%
Values	Daily Returns

Dow Jones Industrial  vs.  Amundi MSCI Europe

Pair Trading with Dow Jones and Amundi MSCI

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

The idea behind Dow Jones Industrial and Amundi MSCI 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.