Correlation Between Lyxor MSCI and Amundi Index

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

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

Diversification Opportunities for Lyxor MSCI and Amundi Index

0.35

Correlation Coefficient

Lyxor MSCI  Amundi Index

Weak diversification

The 3 months correlation between Lyxor and Amundi is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor MSCI China 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 Lyxor 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 Lyxor MSCI China 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 Lyxor MSCI i.e., Lyxor MSCI and Amundi Index go up and down completely randomly.

Pair Corralation between Lyxor MSCI and Amundi Index

Assuming the 90 days trading horizon Lyxor MSCI China is expected to generate 1.84 times more return on investment than Amundi Index. However, Lyxor MSCI is 1.84 times more volatile than Amundi Index Solutions. It trades about 0.15 of its potential returns per unit of risk. Amundi Index Solutions is currently generating about -0.02 per unit of risk. If you would invest  1,529  in Lyxor MSCI China on December 4, 2024 and sell it today you would earn a total of  253.00  from holding Lyxor MSCI China or generate 16.55% return on investment over 90 days.

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

Lyxor MSCI China  vs.  Amundi Index Solutions

Lyxor MSCI China

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor MSCI China are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Lyxor MSCI showed solid returns over the last few months and may actually be approaching a breakup point.

Amundi Index Solutions

Risk-Adjusted Performance

Very Weak

Over the last 90 days Amundi Index Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Amundi Index is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lyxor MSCI and Amundi Index

The main advantage of trading using opposite Lyxor MSCI and Amundi Index positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lyxor MSCI 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 Lyxor MSCI China 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.