Correlation Between AMS Small and Brunel International

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

By analyzing existing cross correlation between AMS Small Cap and Brunel International NV, you can compare the effects of market volatilities on AMS Small and Brunel International 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 AMS Small with a short position of Brunel International. Check out your portfolio center. Please also check ongoing floating volatility patterns of AMS Small and Brunel International.

Diversification Opportunities for AMS Small and Brunel International

0.87

Correlation Coefficient

AMS Small  Brunel International

Very poor diversification

The 3 months correlation between AMS and Brunel is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding AMS Small Cap and Brunel International NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brunel International and AMS Small 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 AMS Small Cap are associated (or correlated) with Brunel International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brunel International has no effect on the direction of AMS Small i.e., AMS Small and Brunel International go up and down completely randomly.

Pair Corralation between AMS Small and Brunel International

Assuming the 90 days trading horizon AMS Small is expected to generate 1.3 times less return on investment than Brunel International. But when comparing it to its historical volatility, AMS Small Cap is 1.91 times less risky than Brunel International. It trades about 0.22 of its potential returns per unit of risk. Brunel International NV is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  885.00  in Brunel International NV on December 2, 2024 and sell it today you would earn a total of  147.00  from holding Brunel International NV or generate 16.61% return on investment over 90 days.

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

AMS Small Cap  vs.  Brunel International NV

Pair Trading with AMS Small and Brunel International

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

The idea behind AMS Small Cap and Brunel International NV 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.