Correlation Between Affiliated Managers and MSP Recovery

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

Diversification Opportunities for Affiliated Managers and MSP Recovery

-0.76

Correlation Coefficient

Affiliated Managers  MSP Recovery

Pay attention - limited upside

The 3 months correlation between Affiliated and MSP is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Affiliated Managers Group and MSP Recovery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MSP Recovery 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 MSP Recovery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MSP Recovery has no effect on the direction of Affiliated Managers i.e., Affiliated Managers and MSP Recovery go up and down completely randomly.

Pair Corralation between Affiliated Managers and MSP Recovery

Considering the 90-day investment horizon Affiliated Managers Group is expected to under-perform the MSP Recovery. But the stock apears to be less risky and, when comparing its historical volatility, Affiliated Managers Group is 220.5 times less risky than MSP Recovery. The stock trades about -0.23 of its potential returns per unit of risk. The MSP Recovery is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  11.00  in MSP Recovery on October 6, 2024 and sell it today you would earn a total of  231.00  from holding MSP Recovery or generate 2100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	97.62%
Values	Daily Returns

Affiliated Managers Group  vs.  MSP Recovery

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.

MSP Recovery

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MSP Recovery are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, MSP Recovery reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Affiliated Managers and MSP Recovery

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

The idea behind Affiliated Managers Group and MSP Recovery 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.