Correlation Between AMS Small and Fugro NV

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

Diversification Opportunities for AMS Small and Fugro NV

0.24

Correlation Coefficient

AMS Small  Fugro NV

Modest diversification

The 3 months correlation between AMS and Fugro is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding AMS Small Cap and Fugro NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fugro 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 Fugro NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fugro NV has no effect on the direction of AMS Small i.e., AMS Small and Fugro NV go up and down completely randomly.

Pair Corralation between AMS Small and Fugro NV

Assuming the 90 days trading horizon AMS Small Cap is expected to under-perform the Fugro NV. But the index apears to be less risky and, when comparing its historical volatility, AMS Small Cap is 2.07 times less risky than Fugro NV. The index trades about 0.0 of its potential returns per unit of risk. The Fugro NV is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,197  in Fugro NV on October 12, 2024 and sell it today you would earn a total of  490.00  from holding Fugro NV or generate 40.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

AMS Small Cap  vs.  Fugro NV

Pair Trading with AMS Small and Fugro NV

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

The idea behind AMS Small Cap and Fugro 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.