Correlation Between IShares Physical and AMG Advanced

Can any of the company-specific risk be diversified away by investing in both IShares Physical and AMG Advanced 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 IShares Physical and AMG Advanced into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares Physical Silver and AMG Advanced Metallurgical, you can compare the effects of market volatilities on IShares Physical and AMG Advanced 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 IShares Physical with a short position of AMG Advanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Physical and AMG Advanced.

Diversification Opportunities for IShares Physical and AMG Advanced

0.69

Correlation Coefficient

IShares Physical  AMG Advanced

Poor diversification

The 3 months correlation between IShares and AMG is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding iShares Physical Silver and AMG Advanced Metallurgical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMG Advanced Metallu and IShares Physical 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 iShares Physical Silver are associated (or correlated) with AMG Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMG Advanced Metallu has no effect on the direction of IShares Physical i.e., IShares Physical and AMG Advanced go up and down completely randomly.

Pair Corralation between IShares Physical and AMG Advanced

Assuming the 90 days trading horizon IShares Physical is expected to generate 1.04 times less return on investment than AMG Advanced. But when comparing it to its historical volatility, iShares Physical Silver is 3.11 times less risky than AMG Advanced. It trades about 0.21 of its potential returns per unit of risk. AMG Advanced Metallurgical is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,373  in AMG Advanced Metallurgical on December 30, 2024 and sell it today you would earn a total of  190.00  from holding AMG Advanced Metallurgical or generate 13.84% return on investment over 90 days.

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

iShares Physical Silver  vs.  AMG Advanced Metallurgical

iShares Physical Silver

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Physical Silver are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, IShares Physical unveiled solid returns over the last few months and may actually be approaching a breakup point.

AMG Advanced Metallu

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AMG Advanced Metallurgical are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, AMG Advanced unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares Physical and AMG Advanced

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

The idea behind iShares Physical Silver and AMG Advanced Metallurgical 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.

Check out your portfolio center.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.