Correlation Between AMS Small and Sif Holding

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

Diversification Opportunities for AMS Small and Sif Holding

-0.7

Correlation Coefficient

AMS Small  Sif Holding

Excellent diversification

The 3 months correlation between AMS and Sif is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding AMS Small Cap and Sif Holding NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sif Holding 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 Sif Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sif Holding NV has no effect on the direction of AMS Small i.e., AMS Small and Sif Holding go up and down completely randomly.

Pair Corralation between AMS Small and Sif Holding

Assuming the 90 days trading horizon AMS Small Cap is expected to generate 0.35 times more return on investment than Sif Holding. However, AMS Small Cap is 2.89 times less risky than Sif Holding. It trades about 0.17 of its potential returns per unit of risk. Sif Holding NV is currently generating about -0.16 per unit of risk. If you would invest  124,534  in AMS Small Cap on December 29, 2024 and sell it today you would earn a total of  13,610  from holding AMS Small Cap or generate 10.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

AMS Small Cap  vs.  Sif Holding NV

Pair Trading with AMS Small and Sif Holding

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

The idea behind AMS Small Cap and Sif Holding 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.