Correlation Between Diversified International and Amg River

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

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

Diversification Opportunities for Diversified International and Amg River

-0.63

Correlation Coefficient

Diversified International  Amg River

Excellent diversification

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

Pair Corralation between Diversified International and Amg River

Assuming the 90 days horizon Diversified International Fund is expected to under-perform the Amg River. But the mutual fund apears to be less risky and, when comparing its historical volatility, Diversified International Fund is 1.27 times less risky than Amg River. The mutual fund trades about -0.01 of its potential returns per unit of risk. The Amg River Road is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  1,506  in Amg River Road on September 12, 2024 and sell it today you would earn a total of  240.00  from holding Amg River Road or generate 15.94% return on investment over 90 days.

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

Diversified International Fund  vs.  Amg River Road

Diversified International

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 basic indicators, Amg River showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Diversified International and Amg River

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

The idea behind Diversified International Fund and Amg River Road 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.