Can any of the company-specific risk be diversified away by investing in both SSgA SPDR 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 SSgA SPDR and Amundi Index into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SSgA SPDR ETFs and Amundi Index Solutions, you can compare the effects of market volatilities on SSgA SPDR 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 SSgA SPDR with a short position of Amundi Index. Check out your portfolio center. Please also check ongoing floating volatility patterns of SSgA SPDR and Amundi Index.
Diversification Opportunities for SSgA SPDR and Amundi Index
The 3 months correlation between SSgA and Amundi is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding SSgA SPDR ETFs 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 SSgA SPDR 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 SSgA SPDR ETFs 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 SSgA SPDR i.e., SSgA SPDR and Amundi Index go up and down completely randomly.
Pair Corralation between SSgA SPDR and Amundi Index
Assuming the 90 days trading horizon SSgA SPDR is expected to generate 3.44 times less return on investment than Amundi Index. In addition to that, SSgA SPDR is 1.63 times more volatile than Amundi Index Solutions. It trades about 0.01 of its total potential returns per unit of risk. Amundi Index Solutions is currently generating about 0.08 per unit of volatility. If you would invest 69,505 in Amundi Index Solutions on March 6, 2024 and sell it today you would earn a total of 26,635 from holding Amundi Index Solutions or generate 38.32% return on investment over 90 days.
Over the last 90 days SSgA SPDR ETFs has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, SSgA SPDR is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Compared to the overall equity markets, risk-adjusted returns on investments in Amundi Index Solutions are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Amundi Index is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.