Correlation Between Amg River and Amg Southernsun
Can any of the company-specific risk be diversified away by investing in both Amg River and Amg Southernsun 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 River and Amg Southernsun into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amg River Road and Amg Southernsun Small, you can compare the effects of market volatilities on Amg River and Amg Southernsun 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 River with a short position of Amg Southernsun. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amg River and Amg Southernsun.
Diversification Opportunities for Amg River and Amg Southernsun
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Amg and Amg is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Amg River Road and Amg Southernsun Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amg Southernsun Small and Amg River 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 River Road are associated (or correlated) with Amg Southernsun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amg Southernsun Small has no effect on the direction of Amg River i.e., Amg River and Amg Southernsun go up and down completely randomly.
Pair Corralation between Amg River and Amg Southernsun
Assuming the 90 days horizon Amg River is expected to generate 1.37 times less return on investment than Amg Southernsun. But when comparing it to its historical volatility, Amg River Road is 2.05 times less risky than Amg Southernsun. It trades about 0.3 of its potential returns per unit of risk. Amg Southernsun Small is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 2,898 in Amg Southernsun Small on August 27, 2024 and sell it today you would earn a total of 173.00 from holding Amg Southernsun Small or generate 5.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Amg River Road vs. Amg Southernsun Small
Performance |
| Timeline |
| Amg River Road |
| Amg Southernsun Small |
Amg River and Amg Southernsun Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amg River and Amg Southernsun
The main advantage of trading using opposite Amg River and Amg Southernsun positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amg River position performs unexpectedly, Amg Southernsun 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 Amg Southernsun will offset losses from the drop in Amg Southernsun's long position.| Amg River vs. Amg Southernsun Equity | Amg River vs. Amg Southernsun Equity | Amg River vs. Amg Fq Long Short | Amg River vs. Amg Southernsun Small |
| Amg Southernsun vs. American Beacon Bridgeway | Amg Southernsun vs. John Hancock Disciplined | Amg Southernsun vs. Large Cap Fund | Amg Southernsun vs. Baird E Plus |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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