Correlation Between Smithson Investment and Amundi Physical

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

By analyzing existing cross correlation between Smithson Investment Trust and Amundi Physical Gold, you can compare the effects of market volatilities on Smithson Investment and Amundi Physical 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 Smithson Investment with a short position of Amundi Physical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smithson Investment and Amundi Physical.

Diversification Opportunities for Smithson Investment and Amundi Physical

0.28

Correlation Coefficient

Smithson Investment  Amundi Physical

Modest diversification

The 3 months correlation between Smithson and Amundi is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Smithson Investment Trust and Amundi Physical Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amundi Physical Gold and Smithson Investment 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 Smithson Investment Trust are associated (or correlated) with Amundi Physical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amundi Physical Gold has no effect on the direction of Smithson Investment i.e., Smithson Investment and Amundi Physical go up and down completely randomly.

Pair Corralation between Smithson Investment and Amundi Physical

Assuming the 90 days trading horizon Smithson Investment is expected to generate 1.26 times less return on investment than Amundi Physical. But when comparing it to its historical volatility, Smithson Investment Trust is 1.05 times less risky than Amundi Physical. It trades about 0.13 of its potential returns per unit of risk. Amundi Physical Gold is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  775,450  in Amundi Physical Gold on September 12, 2024 and sell it today you would earn a total of  70,113  from holding Amundi Physical Gold or generate 9.04% return on investment over 90 days.

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

Smithson Investment Trust  vs.  Amundi Physical Gold

Smithson Investment Trust

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Smithson Investment Trust are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Smithson Investment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Amundi Physical Gold

Risk-Adjusted Performance

12 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Amundi Physical Gold are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Amundi Physical may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Smithson Investment and Amundi Physical

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

The idea behind Smithson Investment Trust and Amundi Physical Gold 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.