Correlation Between AEX Amsterdam and America Movil

Can any of the company-specific risk be diversified away by investing in both AEX Amsterdam and America Movil 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 AEX Amsterdam and America Movil into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AEX Amsterdam Index and AMX-Index, you can compare the effects of market volatilities on AEX Amsterdam and America Movil 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 AEX Amsterdam with a short position of America Movil. Check out your portfolio center. Please also check ongoing floating volatility patterns of AEX Amsterdam and America Movil.

Diversification Opportunities for AEX Amsterdam and America Movil

0.86

Correlation Coefficient

AEX Amsterdam  America Movil

Very poor diversification

The 3 months correlation between AEX and America is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding AEX Amsterdam Index and AMX-Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on America Movil and AEX Amsterdam 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 AEX Amsterdam Index are associated (or correlated) with America Movil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of America Movil has no effect on the direction of AEX Amsterdam i.e., AEX Amsterdam and America Movil go up and down completely randomly.

Pair Corralation between AEX Amsterdam and America Movil

Assuming the 90 days trading horizon AEX Amsterdam Index is expected to under-perform the America Movil. In addition to that, AEX Amsterdam is 1.0 times more volatile than AMX-Index. It trades about -0.09 of its total potential returns per unit of risk. AMX-Index is currently generating about -0.09 per unit of volatility. If you would invest  90,505  in AMX-Index on August 30, 2024 and sell it today you would lose (4,251) from holding AMX-Index or give up 4.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

AEX Amsterdam Index  vs.  AMX-Index

Pair Trading with AEX Amsterdam and America Movil

The main advantage of trading using opposite AEX Amsterdam and America Movil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AEX Amsterdam position performs unexpectedly, America Movil 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 America Movil will offset losses from the drop in America Movil's long position.

The idea behind AEX Amsterdam Index and AMX-Index 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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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.