Correlation Between AMS Small and IShares Euro
Can any of the company-specific risk be diversified away by investing in both AMS Small and IShares 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 AMS Small and IShares Euro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AMS Small Cap and iShares Euro Corporate, you can compare the effects of market volatilities on AMS Small and IShares 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 AMS Small with a short position of IShares Euro. Check out your portfolio center. Please also check ongoing floating volatility patterns of AMS Small and IShares Euro.
Diversification Opportunities for AMS Small and IShares Euro
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between AMS and IShares is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding AMS Small Cap and iShares Euro Corporate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Euro Corporate and AMS Small 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 AMS Small Cap are associated (or correlated) with IShares Euro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Euro Corporate has no effect on the direction of AMS Small i.e., AMS Small and IShares Euro go up and down completely randomly.
Pair Corralation between AMS Small and IShares Euro
Assuming the 90 days trading horizon AMS Small Cap is expected to generate 13.54 times more return on investment than IShares Euro. However, AMS Small is 13.54 times more volatile than iShares Euro Corporate. It trades about 0.06 of its potential returns per unit of risk. iShares Euro Corporate is currently generating about 0.14 per unit of risk. If you would invest 120,768 in AMS Small Cap on September 1, 2024 and sell it today you would earn a total of 1,910 from holding AMS Small Cap or generate 1.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
AMS Small Cap vs. iShares Euro Corporate
Performance |
| Timeline |
AMS Small and IShares Euro Volatility Contrast
Predicted Return Density |
| Returns |
AMS Small Cap
Pair trading matchups for AMS Small
iShares Euro Corporate
Pair trading matchups for IShares Euro
Pair Trading with AMS Small and IShares Euro
The main advantage of trading using opposite AMS Small and IShares Euro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AMS Small position performs unexpectedly, IShares 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 IShares Euro will offset losses from the drop in IShares Euro's long position.The idea behind AMS Small Cap and iShares Euro Corporate 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.| IShares Euro vs. iShares III Public | IShares Euro vs. iShares Core MSCI | IShares Euro vs. iShares France Govt | IShares Euro vs. iShares Edge MSCI |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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