Correlation Between Amg River and Amg Frontier

Can any of the company-specific risk be diversified away by investing in both Amg River and Amg Frontier 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 Amg Frontier 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 Amg Frontier Small, you can compare the effects of market volatilities on Amg River and Amg Frontier 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 Amg Frontier. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amg River and Amg Frontier.

Diversification Opportunities for Amg River and Amg Frontier

0.63

Correlation Coefficient

Amg River  Amg Frontier

Poor diversification

The 3 months correlation between Amg and Amg is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Amg River Road and Amg Frontier Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amg Frontier Small 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 Amg Frontier. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amg Frontier Small has no effect on the direction of Amg River i.e., Amg River and Amg Frontier go up and down completely randomly.

Pair Corralation between Amg River and Amg Frontier

Assuming the 90 days horizon Amg River Road is expected to under-perform the Amg Frontier. In addition to that, Amg River is 3.14 times more volatile than Amg Frontier Small. It trades about -0.13 of its total potential returns per unit of risk. Amg Frontier Small is currently generating about -0.06 per unit of volatility. If you would invest  1,014  in Amg Frontier Small on September 22, 2024 and sell it today you would lose (72.00) from holding Amg Frontier Small or give up 7.1% of portfolio value over 90 days.

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

Amg River Road  vs.  Amg Frontier Small

Amg River Road

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amg River Road has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Amg Frontier Small

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amg Frontier Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Amg River and Amg Frontier

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

The idea behind Amg River Road and Amg Frontier Small 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 Transaction History module to view history of all your transactions and understand their impact on performance.