Correlation Between Amundi MSCI and Amundi SP

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

By analyzing existing cross correlation between Amundi MSCI World and Amundi SP 500, you can compare the effects of market volatilities on Amundi MSCI and Amundi SP 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 Amundi MSCI with a short position of Amundi SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amundi MSCI and Amundi SP.

Diversification Opportunities for Amundi MSCI and Amundi SP

0.69

Correlation Coefficient

Amundi MSCI  Amundi SP

Poor diversification

The 3 months correlation between Amundi and Amundi is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Amundi MSCI World and Amundi SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amundi SP 500 and Amundi 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 Amundi MSCI World are associated (or correlated) with Amundi SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amundi SP 500 has no effect on the direction of Amundi MSCI i.e., Amundi MSCI and Amundi SP go up and down completely randomly.

Pair Corralation between Amundi MSCI and Amundi SP

Assuming the 90 days trading horizon Amundi MSCI World is expected to under-perform the Amundi SP. In addition to that, Amundi MSCI is 1.86 times more volatile than Amundi SP 500. It trades about -0.16 of its total potential returns per unit of risk. Amundi SP 500 is currently generating about -0.02 per unit of volatility. If you would invest  31,100  in Amundi SP 500 on December 30, 2024 and sell it today you would lose (425.00) from holding Amundi SP 500 or give up 1.37% of portfolio value over 90 days.

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

Amundi MSCI World  vs.  Amundi SP 500

Amundi MSCI World

Risk-Adjusted Performance

Very Weak

Over the last 90 days Amundi MSCI World has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Etf's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the ETF investors.

Amundi SP 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days Amundi SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Amundi SP is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Amundi MSCI and Amundi SP

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

The idea behind Amundi MSCI World and Amundi SP 500 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.