Correlation Between Amg River and Amg Gwk

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

Diversification Opportunities for Amg River and Amg Gwk

0.61

Correlation Coefficient

Amg River  Amg Gwk

Poor diversification

The 3 months correlation between Amg and Amg is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Amg River Road and Amg Gwk E in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amg Gwk E 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 Amg Gwk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amg Gwk E has no effect on the direction of Amg River i.e., Amg River and Amg Gwk go up and down completely randomly.

Pair Corralation between Amg River and Amg Gwk

Assuming the 90 days horizon Amg River Road is expected to under-perform the Amg Gwk. In addition to that, Amg River is 2.37 times more volatile than Amg Gwk E. It trades about -0.33 of its total potential returns per unit of risk. Amg Gwk E is currently generating about 0.32 per unit of volatility. If you would invest  883.00  in Amg Gwk E on December 4, 2024 and sell it today you would earn a total of  20.00  from holding Amg Gwk E or generate 2.27% return on investment over 90 days.

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

Amg River Road  vs.  Amg Gwk E

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.

Amg Gwk E

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Amg Gwk E are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Amg Gwk 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 Amg Gwk

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

The idea behind Amg River Road and Amg Gwk E 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.