Correlation Between Litigation Capital and AMG Advanced

Can any of the company-specific risk be diversified away by investing in both Litigation Capital and AMG Advanced 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 Litigation Capital and AMG Advanced into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Litigation Capital Management and AMG Advanced Metallurgical, you can compare the effects of market volatilities on Litigation Capital and AMG Advanced 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 Litigation Capital with a short position of AMG Advanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Litigation Capital and AMG Advanced.

Diversification Opportunities for Litigation Capital and AMG Advanced

0.06

Correlation Coefficient

Litigation Capital  AMG Advanced

Significant diversification

The 3 months correlation between Litigation and AMG is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Litigation Capital Management and AMG Advanced Metallurgical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMG Advanced Metallu and Litigation Capital 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 Litigation Capital Management are associated (or correlated) with AMG Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMG Advanced Metallu has no effect on the direction of Litigation Capital i.e., Litigation Capital and AMG Advanced go up and down completely randomly.

Pair Corralation between Litigation Capital and AMG Advanced

Assuming the 90 days trading horizon Litigation Capital Management is expected to generate 1.06 times more return on investment than AMG Advanced. However, Litigation Capital is 1.06 times more volatile than AMG Advanced Metallurgical. It trades about 0.11 of its potential returns per unit of risk. AMG Advanced Metallurgical is currently generating about 0.0 per unit of risk. If you would invest  9,925  in Litigation Capital Management on August 31, 2024 and sell it today you would earn a total of  1,800  from holding Litigation Capital Management or generate 18.14% return on investment over 90 days.

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

Litigation Capital Management  vs.  AMG Advanced Metallurgical

Litigation Capital

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Litigation Capital Management are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Litigation Capital exhibited solid returns over the last few months and may actually be approaching a breakup point.

AMG Advanced Metallu

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AMG Advanced Metallurgical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, AMG Advanced is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Litigation Capital and AMG Advanced

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

The idea behind Litigation Capital Management and AMG Advanced Metallurgical 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.