Correlation Between Amg River and Catalyst/smh High

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

Diversification Opportunities for Amg River and Catalyst/smh High

0.15

Correlation Coefficient

Amg River  Catalyst/smh High

Average diversification

The 3 months correlation between Amg and Catalyst/smh is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Amg River Road and Catalystsmh High Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalystsmh High Income 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 Catalyst/smh High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalystsmh High Income has no effect on the direction of Amg River i.e., Amg River and Catalyst/smh High go up and down completely randomly.

Pair Corralation between Amg River and Catalyst/smh High

Assuming the 90 days horizon Amg River Road is expected to under-perform the Catalyst/smh High. In addition to that, Amg River is 2.9 times more volatile than Catalystsmh High Income. It trades about -0.2 of its total potential returns per unit of risk. Catalystsmh High Income is currently generating about -0.19 per unit of volatility. If you would invest  374.00  in Catalystsmh High Income on December 4, 2024 and sell it today you would lose (4.00) from holding Catalystsmh High Income or give up 1.07% of portfolio value over 90 days.

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

Amg River Road  vs.  Catalystsmh High Income

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 weak performance in the last few months, the Fund's primary 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.

Catalystsmh High Income

Risk-Adjusted Performance

Very Weak

Over the last 90 days Catalystsmh High Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Catalyst/smh High 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 Catalyst/smh High

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

The idea behind Amg River Road and Catalystsmh High Income 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.