Correlation Between Amg Managers and Common Stock

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

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

Diversification Opportunities for Amg Managers and Common Stock

0.83

Correlation Coefficient

Amg Managers  Common Stock

Very poor diversification

The 3 months correlation between Amg and Common is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Amg Managers Fairpointe and Common Stock Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Common Stock and Amg Managers 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 Managers Fairpointe are associated (or correlated) with Common Stock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Common Stock has no effect on the direction of Amg Managers i.e., Amg Managers and Common Stock go up and down completely randomly.

Pair Corralation between Amg Managers and Common Stock

Assuming the 90 days horizon Amg Managers Fairpointe is expected to under-perform the Common Stock. In addition to that, Amg Managers is 1.8 times more volatile than Common Stock Fund. It trades about -0.17 of its total potential returns per unit of risk. Common Stock Fund is currently generating about -0.19 per unit of volatility. If you would invest  4,032  in Common Stock Fund on December 5, 2024 and sell it today you would lose (402.00) from holding Common Stock Fund or give up 9.97% of portfolio value over 90 days.

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

Amg Managers Fairpointe  vs.  Common Stock Fund

Amg Managers Fairpointe

Risk-Adjusted Performance

Very Weak

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

Common Stock

Risk-Adjusted Performance

Very Weak

Over the last 90 days Common Stock Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's primary 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 Managers and Common Stock

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

The idea behind Amg Managers Fairpointe and Common Stock Fund 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.