Correlation Between DAX Index and Amundi ETF

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

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

Diversification Opportunities for DAX Index and Amundi ETF

-0.11

Correlation Coefficient

DAX Index  Amundi ETF

Good diversification

The 3 months correlation between DAX and Amundi is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding DAX Index and Amundi ETF MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amundi ETF MSCI and DAX 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 DAX Index are associated (or correlated) with Amundi ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amundi ETF MSCI has no effect on the direction of DAX Index i.e., DAX Index and Amundi ETF go up and down completely randomly.

Pair Corralation between DAX Index and Amundi ETF

Assuming the 90 days trading horizon DAX Index is expected to under-perform the Amundi ETF. But the index apears to be less risky and, when comparing its historical volatility, DAX Index is 1.17 times less risky than Amundi ETF. The index trades about -0.28 of its potential returns per unit of risk. The Amundi ETF MSCI is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  15,608  in Amundi ETF MSCI on October 6, 2024 and sell it today you would lose (154.00) from holding Amundi ETF MSCI or give up 0.99% of portfolio value over 90 days.

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

DAX Index  vs.  Amundi ETF MSCI

Pair Trading with DAX Index and Amundi ETF

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

The idea behind DAX Index and Amundi ETF MSCI 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.