Correlation Between AMS Small and SPDR SP
Can any of the company-specific risk be diversified away by investing in both AMS Small and SPDR 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 AMS Small and SPDR SP 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 SPDR SP 500, you can compare the effects of market volatilities on AMS Small and SPDR 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 AMS Small with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of AMS Small and SPDR SP.
Diversification Opportunities for AMS Small and SPDR SP
Average diversification
The 3 months correlation between AMS and SPDR is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding AMS Small Cap and SPDR SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP 500 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 SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP 500 has no effect on the direction of AMS Small i.e., AMS Small and SPDR SP go up and down completely randomly.
Pair Corralation between AMS Small and SPDR SP
Assuming the 90 days trading horizon AMS Small Cap is expected to under-perform the SPDR SP. But the index apears to be less risky and, when comparing its historical volatility, AMS Small Cap is 1.17 times less risky than SPDR SP. The index trades about -0.19 of its potential returns per unit of risk. The SPDR SP 500 is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 1,309 in SPDR SP 500 on August 27, 2024 and sell it today you would earn a total of 80.00 from holding SPDR SP 500 or generate 6.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AMS Small Cap vs. SPDR SP 500
Performance |
| Timeline |
AMS Small and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
AMS Small Cap
Pair trading matchups for AMS Small
SPDR SP 500
Pair trading matchups for SPDR SP
Pair Trading with AMS Small and SPDR SP
The main advantage of trading using opposite AMS Small and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AMS Small position performs unexpectedly, SPDR 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 SPDR SP will offset losses from the drop in SPDR SP's long position.| AMS Small vs. Reinet Investments SCA | AMS Small vs. Sligro Food Group | AMS Small vs. Allfunds Group | AMS Small vs. AMG Advanced Metallurgical |
| SPDR SP vs. Vanguard SP 500 | SPDR SP vs. SPDR Dow Jones | SPDR SP vs. iShares Core MSCI | SPDR SP vs. iShares SP 500 |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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