Correlation Between Xtrackers MSCI and Amundi Euro

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

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

Diversification Opportunities for Xtrackers MSCI and Amundi Euro

-0.5

Correlation Coefficient

Xtrackers MSCI  Amundi Euro

Very good diversification

The 3 months correlation between Xtrackers and Amundi is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers MSCI World and Amundi Euro Stoxx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amundi Euro Stoxx and Xtrackers 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 Xtrackers MSCI World are associated (or correlated) with Amundi Euro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amundi Euro Stoxx has no effect on the direction of Xtrackers MSCI i.e., Xtrackers MSCI and Amundi Euro go up and down completely randomly.

Pair Corralation between Xtrackers MSCI and Amundi Euro

Assuming the 90 days trading horizon Xtrackers MSCI World is expected to generate 1.59 times more return on investment than Amundi Euro. However, Xtrackers MSCI is 1.59 times more volatile than Amundi Euro Stoxx. It trades about 0.05 of its potential returns per unit of risk. Amundi Euro Stoxx is currently generating about 0.02 per unit of risk. If you would invest  9,138  in Xtrackers MSCI World on October 4, 2024 and sell it today you would earn a total of  61.00  from holding Xtrackers MSCI World or generate 0.67% return on investment over 90 days.

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

Xtrackers MSCI World  vs.  Amundi Euro Stoxx

Xtrackers MSCI World

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers MSCI World are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Xtrackers MSCI may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Amundi Euro Stoxx

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amundi Euro Stoxx has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Amundi Euro is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Xtrackers MSCI and Amundi Euro

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

The idea behind Xtrackers MSCI World and Amundi Euro Stoxx 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..