Correlation Between Amg Fq and Amg Frontier

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

By analyzing existing cross correlation between Amg Fq Long Short and Amg Frontier Small, you can compare the effects of market volatilities on Amg Fq and Amg Frontier 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 Amg Fq with a short position of Amg Frontier. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amg Fq and Amg Frontier.

Diversification Opportunities for Amg Fq and Amg Frontier

0.93

Correlation Coefficient

Amg Fq  Amg Frontier

Almost no diversification

The 3 months correlation between Amg and Amg is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Amg Fq Long Short and Amg Frontier Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amg Frontier Small and Amg Fq 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 Amg Fq Long Short are associated (or correlated) with Amg Frontier. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amg Frontier Small has no effect on the direction of Amg Fq i.e., Amg Fq and Amg Frontier go up and down completely randomly.

Pair Corralation between Amg Fq and Amg Frontier

Assuming the 90 days horizon Amg Fq is expected to generate 1.53 times less return on investment than Amg Frontier. But when comparing it to its historical volatility, Amg Fq Long Short is 2.32 times less risky than Amg Frontier. It trades about 0.06 of its potential returns per unit of risk. Amg Frontier Small is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,028  in Amg Frontier Small on September 13, 2024 and sell it today you would earn a total of  9.00  from holding Amg Frontier Small or generate 0.88% return on investment over 90 days.

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

Amg Fq Long Short  vs.  Amg Frontier Small

Amg Fq Long

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amg Fq Long Short are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Amg Fq may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Amg Frontier Small

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amg Frontier Small are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Amg Frontier may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Amg Fq and Amg Frontier

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

The idea behind Amg Fq Long Short and Amg Frontier Small 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.