Correlation Between Amg River and Parametric Intl

Can any of the company-specific risk be diversified away by investing in both Amg River and Parametric Intl 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 Amg River and Parametric Intl into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Amg River Road and Parametric Intl Equity, you can compare the effects of market volatilities on Amg River and Parametric Intl 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 Amg River with a short position of Parametric Intl. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amg River and Parametric Intl.

Diversification Opportunities for Amg River and Parametric Intl

-0.76

Correlation Coefficient

Amg River  Parametric Intl

Pay attention - limited upside

The 3 months correlation between Amg and Parametric is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Amg River Road and Parametric Intl Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parametric Intl Equity and Amg River 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 Amg River Road are associated (or correlated) with Parametric Intl. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parametric Intl Equity has no effect on the direction of Amg River i.e., Amg River and Parametric Intl go up and down completely randomly.

Pair Corralation between Amg River and Parametric Intl

Assuming the 90 days horizon Amg River Road is expected to generate 1.32 times more return on investment than Parametric Intl. However, Amg River is 1.32 times more volatile than Parametric Intl Equity. It trades about 0.23 of its potential returns per unit of risk. Parametric Intl Equity is currently generating about -0.08 per unit of risk. If you would invest  976.00  in Amg River Road on September 2, 2024 and sell it today you would earn a total of  145.00  from holding Amg River Road or generate 14.86% return on investment over 90 days.

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

Amg River Road  vs.  Parametric Intl Equity

Amg River Road

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Amg River Road are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak primary indicators, Amg River showed solid returns over the last few months and may actually be approaching a breakup point.

Parametric Intl Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Parametric Intl Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Parametric Intl is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Amg River and Parametric Intl

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

The idea behind Amg River Road and Parametric Intl Equity 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.