Correlation Between AMS Small and CTP NV

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

Diversification Opportunities for AMS Small and CTP NV

0.31

Correlation Coefficient

AMS Small  CTP NV

Weak diversification

The 3 months correlation between AMS and CTP is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding AMS Small Cap and CTP NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CTP NV 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 CTP NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CTP NV has no effect on the direction of AMS Small i.e., AMS Small and CTP NV go up and down completely randomly.

Pair Corralation between AMS Small and CTP NV

Assuming the 90 days trading horizon AMS Small is expected to generate 1.47 times less return on investment than CTP NV. But when comparing it to its historical volatility, AMS Small Cap is 1.48 times less risky than CTP NV. It trades about 0.16 of its potential returns per unit of risk. CTP NV is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,490  in CTP NV on October 22, 2024 and sell it today you would earn a total of  64.00  from holding CTP NV or generate 4.3% return on investment over 90 days.

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

AMS Small Cap  vs.  CTP NV

Pair Trading with AMS Small and CTP NV

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

The idea behind AMS Small Cap and CTP 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.