Correlation Between FlexShares Morningstar and Amplify
Can any of the company-specific risk be diversified away by investing in both FlexShares Morningstar and Amplify 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 FlexShares Morningstar and Amplify into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FlexShares Morningstar Emerging and Amplify, you can compare the effects of market volatilities on FlexShares Morningstar and Amplify 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 FlexShares Morningstar with a short position of Amplify. Check out your portfolio center. Please also check ongoing floating volatility patterns of FlexShares Morningstar and Amplify.
Diversification Opportunities for FlexShares Morningstar and Amplify
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between FlexShares and Amplify is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding FlexShares Morningstar Emergin and Amplify in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amplify and FlexShares Morningstar 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 FlexShares Morningstar Emerging are associated (or correlated) with Amplify. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amplify has no effect on the direction of FlexShares Morningstar i.e., FlexShares Morningstar and Amplify go up and down completely randomly.
Pair Corralation between FlexShares Morningstar and Amplify
Given the investment horizon of 90 days FlexShares Morningstar Emerging is expected to generate 0.18 times more return on investment than Amplify. However, FlexShares Morningstar Emerging is 5.63 times less risky than Amplify. It trades about 0.05 of its potential returns per unit of risk. Amplify is currently generating about -0.04 per unit of risk. If you would invest 4,494 in FlexShares Morningstar Emerging on September 2, 2024 and sell it today you would earn a total of 883.00 from holding FlexShares Morningstar Emerging or generate 19.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 87.9% |
| Values | Daily Returns |
FlexShares Morningstar Emergin vs. Amplify
Performance |
| Timeline |
| FlexShares Morningstar |
| Amplify |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
FlexShares Morningstar and Amplify Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FlexShares Morningstar and Amplify
The main advantage of trading using opposite FlexShares Morningstar and Amplify positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FlexShares Morningstar position performs unexpectedly, Amplify 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 Amplify will offset losses from the drop in Amplify's long position.The idea behind FlexShares Morningstar Emerging and Amplify 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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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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