Correlation Between Great Elm and Affiliated Managers
Can any of the company-specific risk be diversified away by investing in both Great Elm and Affiliated Managers 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 Great Elm and Affiliated Managers into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Great Elm Capital and Affiliated Managers Group, you can compare the effects of market volatilities on Great Elm and Affiliated Managers 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 Great Elm with a short position of Affiliated Managers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Elm and Affiliated Managers.
Diversification Opportunities for Great Elm and Affiliated Managers
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Great and Affiliated is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Great Elm Capital and Affiliated Managers Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Affiliated Managers and Great Elm 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 Great Elm Capital are associated (or correlated) with Affiliated Managers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Affiliated Managers has no effect on the direction of Great Elm i.e., Great Elm and Affiliated Managers go up and down completely randomly.
Pair Corralation between Great Elm and Affiliated Managers
Assuming the 90 days horizon Great Elm Capital is expected to generate 0.1 times more return on investment than Affiliated Managers. However, Great Elm Capital is 10.21 times less risky than Affiliated Managers. It trades about -0.01 of its potential returns per unit of risk. Affiliated Managers Group is currently generating about -0.07 per unit of risk. If you would invest 2,482 in Great Elm Capital on August 31, 2024 and sell it today you would lose (1.00) from holding Great Elm Capital or give up 0.04% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Great Elm Capital vs. Affiliated Managers Group
Performance |
| Timeline |
| Great Elm Capital |
| Affiliated Managers |
Great Elm and Affiliated Managers Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Great Elm and Affiliated Managers
The main advantage of trading using opposite Great Elm and Affiliated Managers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great Elm position performs unexpectedly, Affiliated Managers 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 Affiliated Managers will offset losses from the drop in Affiliated Managers' long position.The idea behind Great Elm Capital and Affiliated Managers Group 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.| Affiliated Managers vs. Brightsphere Investment Group | Affiliated Managers vs. Franklin Templeton Limited | Affiliated Managers vs. Blackrock Muni Intermediate | Affiliated Managers vs. Munivest Fund |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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