Correlation Between AMG Advanced and Sovereign Metals
Can any of the company-specific risk be diversified away by investing in both AMG Advanced and Sovereign Metals 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 AMG Advanced and Sovereign Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AMG Advanced Metallurgical and Sovereign Metals, you can compare the effects of market volatilities on AMG Advanced and Sovereign Metals 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 AMG Advanced with a short position of Sovereign Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of AMG Advanced and Sovereign Metals.
Diversification Opportunities for AMG Advanced and Sovereign Metals
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between AMG and Sovereign is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding AMG Advanced Metallurgical and Sovereign Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sovereign Metals and AMG Advanced 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 AMG Advanced Metallurgical are associated (or correlated) with Sovereign Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sovereign Metals has no effect on the direction of AMG Advanced i.e., AMG Advanced and Sovereign Metals go up and down completely randomly.
Pair Corralation between AMG Advanced and Sovereign Metals
Assuming the 90 days trading horizon AMG Advanced Metallurgical is expected to under-perform the Sovereign Metals. But the stock apears to be less risky and, when comparing its historical volatility, AMG Advanced Metallurgical is 1.03 times less risky than Sovereign Metals. The stock trades about -0.21 of its potential returns per unit of risk. The Sovereign Metals is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 3,900 in Sovereign Metals on September 2, 2024 and sell it today you would earn a total of 150.00 from holding Sovereign Metals or generate 3.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AMG Advanced Metallurgical vs. Sovereign Metals
Performance |
| Timeline |
| AMG Advanced Metallu |
| Sovereign Metals |
AMG Advanced and Sovereign Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AMG Advanced and Sovereign Metals
The main advantage of trading using opposite AMG Advanced and Sovereign Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AMG Advanced position performs unexpectedly, Sovereign Metals 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 Sovereign Metals will offset losses from the drop in Sovereign Metals' long position.| AMG Advanced vs. Uniper SE | AMG Advanced vs. Mulberry Group PLC | AMG Advanced vs. London Security Plc | AMG Advanced vs. Triad Group PLC |
| Sovereign Metals vs. Axway Software SA | Sovereign Metals vs. Verizon Communications | Sovereign Metals vs. InterContinental Hotels Group | Sovereign Metals vs. Take Two Interactive Software |
Check out your portfolio center.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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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