Correlation Between SP Merval and AMS Small

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

By analyzing existing cross correlation between SP Merval and AMS Small Cap, you can compare the effects of market volatilities on SP Merval and AMS Small 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 SP Merval with a short position of AMS Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of SP Merval and AMS Small.

Diversification Opportunities for SP Merval and AMS Small

0.0

Correlation Coefficient

SP Merval  AMS Small

Pay attention - limited upside

The 3 months correlation between MERV and AMS is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding SP Merval and AMS Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMS Small Cap and SP Merval 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 SP Merval are associated (or correlated) with AMS Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMS Small Cap has no effect on the direction of SP Merval i.e., SP Merval and AMS Small go up and down completely randomly.

Pair Corralation between SP Merval and AMS Small

If you would invest  100,000,000  in SP Merval on August 30, 2024 and sell it today you would earn a total of  0.00  from holding SP Merval or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

SP Merval  vs.  AMS Small Cap

Pair Trading with SP Merval and AMS Small

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

The idea behind SP Merval and AMS Small Cap 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.