Correlation Between SPTSX Dividend and AMC Preferred

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Apply Can any of the company-specific risk be diversified away by investing in both SPTSX Dividend and AMC Preferred 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 SPTSX Dividend and AMC Preferred into the same portfolio, which is an essential part of the fundamental portfolio management process.

Diversification Opportunities for SPTSX Dividend and AMC Preferred

Pair Corralation between SPTSX Dividend and AMC Preferred

SPTSX Dividend Aristocrats  vs.  AMC Preferred Units

Pair Trading with SPTSX Dividend and AMC Preferred

The main advantage of trading using opposite SPTSX Dividend and AMC Preferred positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPTSX Dividend position performs unexpectedly, AMC Preferred 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 AMC Preferred will offset losses from the drop in AMC Preferred's long position.The idea behind SPTSX Dividend Aristocrats and AMC Preferred Units 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.

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