Correlation Between Perritt Microcap and Amg Frontier

Can any of the company-specific risk be diversified away by investing in both Perritt Microcap 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 Perritt Microcap and Amg Frontier 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 Frontier Small, you can compare the effects of market volatilities on Perritt Microcap 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 Perritt Microcap with a short position of Amg Frontier. Check out your portfolio center. Please also check ongoing floating volatility patterns of Perritt Microcap and Amg Frontier.

Diversification Opportunities for Perritt Microcap and Amg Frontier

0.91

Correlation Coefficient

Perritt Microcap  Amg Frontier

Almost no diversification

The 3 months correlation between Perritt and Amg is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Perritt Microcap Opportunities 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 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 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 Perritt Microcap i.e., Perritt Microcap and Amg Frontier go up and down completely randomly.

Pair Corralation between Perritt Microcap and Amg Frontier

Assuming the 90 days horizon Perritt Microcap Opportunities is expected to under-perform the Amg Frontier. But the mutual fund apears to be less risky and, when comparing its historical volatility, Perritt Microcap Opportunities is 1.36 times less risky than Amg Frontier. The mutual fund trades about -0.15 of its potential returns per unit of risk. The Amg Frontier Small is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  882.00  in Amg Frontier Small on December 2, 2024 and sell it today you would lose (33.00) from holding Amg Frontier Small or give up 3.74% of portfolio value over 90 days.

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

Perritt Microcap Opportunities  vs.  Amg Frontier Small

Perritt Microcap Opp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Perritt Microcap Opportunities has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Amg Frontier Small

Risk-Adjusted Performance

Very Weak

Over the last 90 days Amg Frontier Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Perritt Microcap and Amg Frontier

The main advantage of trading using opposite Perritt Microcap and Amg Frontier positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Perritt Microcap 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 Perritt Microcap Opportunities 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.