Correlation Between Amundi MSCI and IShares Govt

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

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

Diversification Opportunities for Amundi MSCI and IShares Govt

0.33

Correlation Coefficient

Amundi MSCI  IShares Govt

Weak diversification

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

Pair Corralation between Amundi MSCI and IShares Govt

Assuming the 90 days trading horizon Amundi MSCI Europe is expected to under-perform the IShares Govt. In addition to that, Amundi MSCI is 1.85 times more volatile than iShares Govt Bond. It trades about -0.08 of its total potential returns per unit of risk. iShares Govt Bond is currently generating about -0.02 per unit of volatility. If you would invest  15,312  in iShares Govt Bond on October 6, 2024 and sell it today you would lose (86.00) from holding iShares Govt Bond or give up 0.56% of portfolio value over 90 days.

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

Amundi MSCI Europe  vs.  iShares Govt Bond

Amundi MSCI Europe

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amundi MSCI Europe has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Amundi MSCI is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

iShares Govt Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Govt Bond has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, IShares Govt is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Amundi MSCI and IShares Govt

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

The idea behind Amundi MSCI Europe and iShares Govt Bond 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.