Correlation Between Affiliated Managers and STRATS SM

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

By analyzing existing cross correlation between Affiliated Managers Group and STRATS SM Trust, you can compare the effects of market volatilities on Affiliated Managers and STRATS SM 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 Affiliated Managers with a short position of STRATS SM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Affiliated Managers and STRATS SM.

Diversification Opportunities for Affiliated Managers and STRATS SM

-0.34

Correlation Coefficient

Affiliated Managers  STRATS SM

Very good diversification

The 3 months correlation between Affiliated and STRATS is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Affiliated Managers Group and STRATS SM Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STRATS SM Trust and Affiliated Managers 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 Affiliated Managers Group are associated (or correlated) with STRATS SM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STRATS SM Trust has no effect on the direction of Affiliated Managers i.e., Affiliated Managers and STRATS SM go up and down completely randomly.

Pair Corralation between Affiliated Managers and STRATS SM

Considering the 90-day investment horizon Affiliated Managers is expected to generate 9.61 times less return on investment than STRATS SM. But when comparing it to its historical volatility, Affiliated Managers Group is 4.06 times less risky than STRATS SM. It trades about 0.01 of its potential returns per unit of risk. STRATS SM Trust is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,161  in STRATS SM Trust on October 6, 2024 and sell it today you would earn a total of  334.00  from holding STRATS SM Trust or generate 15.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	70.51%
Values	Daily Returns

Affiliated Managers Group  vs.  STRATS SM Trust

Affiliated Managers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Affiliated Managers Group has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's technical and fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

STRATS SM Trust

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in STRATS SM Trust are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward-looking indicators, STRATS SM is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Affiliated Managers and STRATS SM

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

The idea behind Affiliated Managers Group and STRATS SM Trust 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.