Correlation Between Xtrackers MSCI and Amundi SP

Can any of the company-specific risk be diversified away by investing in both Xtrackers 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 Xtrackers 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 Xtrackers MSCI World and Amundi SP Global, you can compare the effects of market volatilities on Xtrackers 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 Xtrackers MSCI with a short position of Amundi SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers MSCI and Amundi SP.

Diversification Opportunities for Xtrackers MSCI and Amundi SP

0.92

Correlation Coefficient

Xtrackers MSCI  Amundi SP

Almost no diversification

The 3 months correlation between Xtrackers and Amundi is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers MSCI World and Amundi SP Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amundi SP Global 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 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 Global has no effect on the direction of Xtrackers MSCI i.e., Xtrackers MSCI and Amundi SP go up and down completely randomly.

Pair Corralation between Xtrackers MSCI and Amundi SP

Assuming the 90 days trading horizon Xtrackers MSCI is expected to generate 5.08 times less return on investment than Amundi SP. But when comparing it to its historical volatility, Xtrackers MSCI World is 1.39 times less risky than Amundi SP. It trades about 0.05 of its potential returns per unit of risk. Amundi SP Global is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1,366  in Amundi SP Global on October 4, 2024 and sell it today you would earn a total of  50.00  from holding Amundi SP Global or generate 3.66% return on investment over 90 days.

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

Xtrackers MSCI World  vs.  Amundi SP Global

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 SP Global

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Amundi SP Global are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile forward-looking indicators, Amundi SP exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xtrackers MSCI and Amundi SP

The main advantage of trading using opposite Xtrackers MSCI and Amundi SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers 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 Xtrackers MSCI World and Amundi SP Global 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.