Correlation Between Legal General and Amundi Index

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

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

Diversification Opportunities for Legal General and Amundi Index

0.85

Correlation Coefficient

Legal General  Amundi Index

Very poor diversification

The 3 months correlation between Legal and Amundi is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Legal General UCITS and Amundi Index Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amundi Index Solutions and Legal General 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 Legal General UCITS are associated (or correlated) with Amundi Index. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amundi Index Solutions has no effect on the direction of Legal General i.e., Legal General and Amundi Index go up and down completely randomly.

Pair Corralation between Legal General and Amundi Index

Assuming the 90 days trading horizon Legal General is expected to generate 1.5 times less return on investment than Amundi Index. In addition to that, Legal General is 1.74 times more volatile than Amundi Index Solutions. It trades about 0.09 of its total potential returns per unit of risk. Amundi Index Solutions is currently generating about 0.25 per unit of volatility. If you would invest  14,106  in Amundi Index Solutions on September 18, 2024 and sell it today you would earn a total of  454.00  from holding Amundi Index Solutions or generate 3.22% return on investment over 90 days.

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

Legal General UCITS  vs.  Amundi Index Solutions

Legal General UCITS

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Legal General UCITS are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Legal General reported solid returns over the last few months and may actually be approaching a breakup point.

Amundi Index Solutions

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amundi Index Solutions are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Amundi Index may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Legal General and Amundi Index

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

The idea behind Legal General UCITS and Amundi Index Solutions 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.