Correlation Between Amg River and American Funds

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

Diversification Opportunities for Amg River and American Funds

0.78

Correlation Coefficient

Amg River  American Funds

Poor diversification

The 3 months correlation between Amg and American is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Amg River Road and American Funds Smallcap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Smallcap 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 American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds Smallcap has no effect on the direction of Amg River i.e., Amg River and American Funds go up and down completely randomly.

Pair Corralation between Amg River and American Funds

Assuming the 90 days horizon Amg River Road is expected to generate 0.8 times more return on investment than American Funds. However, Amg River Road is 1.25 times less risky than American Funds. It trades about -0.03 of its potential returns per unit of risk. American Funds Smallcap is currently generating about -0.06 per unit of risk. If you would invest  957.00  in Amg River Road on December 21, 2024 and sell it today you would lose (17.00) from holding Amg River Road or give up 1.78% 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.  American Funds Smallcap

Amg River Road

Risk-Adjusted Performance

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 fairly strong primary indicators, Amg River is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

American Funds Smallcap

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Funds Smallcap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, American Funds 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 American Funds

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

The idea behind Amg River Road and American Funds Smallcap 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..