Correlation Between Perritt Microcap and Amg Managers

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

By analyzing existing cross correlation between Perritt Microcap Opportunities and Amg Managers Emerging, you can compare the effects of market volatilities on Perritt Microcap and Amg Managers 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 Perritt Microcap with a short position of Amg Managers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Perritt Microcap and Amg Managers.

Diversification Opportunities for Perritt Microcap and Amg Managers

0.11

Correlation Coefficient

Perritt Microcap  Amg Managers

Average diversification

The 3 months correlation between Perritt and Amg is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Perritt Microcap Opportunities and Amg Managers Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amg Managers Emerging and Perritt Microcap 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 Perritt Microcap Opportunities are associated (or correlated) with Amg Managers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amg Managers Emerging has no effect on the direction of Perritt Microcap i.e., Perritt Microcap and Amg Managers go up and down completely randomly.

Pair Corralation between Perritt Microcap and Amg Managers

Assuming the 90 days horizon Perritt Microcap is expected to generate 9.44 times less return on investment than Amg Managers. But when comparing it to its historical volatility, Perritt Microcap Opportunities is 1.74 times less risky than Amg Managers. It trades about 0.02 of its potential returns per unit of risk. Amg Managers Emerging is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,317  in Amg Managers Emerging on September 13, 2024 and sell it today you would earn a total of  168.00  from holding Amg Managers Emerging or generate 12.76% return on investment over 90 days.

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

Perritt Microcap Opportunities  vs.  Amg Managers Emerging

Perritt Microcap Opp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Perritt Microcap Opportunities are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Perritt Microcap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Amg Managers Emerging

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Amg Managers Emerging are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Amg Managers showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Perritt Microcap and Amg Managers

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

The idea behind Perritt Microcap Opportunities and Amg Managers Emerging 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.