Correlation Between IShares Nikkei and Amundi MSCI

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

By analyzing existing cross correlation between iShares Nikkei 225 and Amundi MSCI Europe, you can compare the effects of market volatilities on IShares Nikkei 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 IShares Nikkei with a short position of Amundi MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Nikkei and Amundi MSCI.

Diversification Opportunities for IShares Nikkei and Amundi MSCI

0.34

Correlation Coefficient

IShares Nikkei  Amundi MSCI

Weak diversification

The 3 months correlation between IShares and Amundi is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding iShares Nikkei 225 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 IShares Nikkei 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 iShares Nikkei 225 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 IShares Nikkei i.e., IShares Nikkei and Amundi MSCI go up and down completely randomly.

Pair Corralation between IShares Nikkei and Amundi MSCI

Assuming the 90 days trading horizon iShares Nikkei 225 is expected to generate 1.47 times more return on investment than Amundi MSCI. However, IShares Nikkei is 1.47 times more volatile than Amundi MSCI Europe. It trades about -0.05 of its potential returns per unit of risk. Amundi MSCI Europe is currently generating about -0.28 per unit of risk. If you would invest  2,468  in iShares Nikkei 225 on October 8, 2024 and sell it today you would lose (22.00) from holding iShares Nikkei 225 or give up 0.89% of portfolio value over 90 days.

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

iShares Nikkei 225  vs.  Amundi MSCI Europe

iShares Nikkei 225

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Nikkei 225 are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, IShares Nikkei is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

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 current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with IShares Nikkei and Amundi MSCI

The main advantage of trading using opposite IShares Nikkei and Amundi MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Nikkei 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 iShares Nikkei 225 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.