Correlation Between Stone Ridge and Amg River

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

By analyzing existing cross correlation between Stone Ridge Diversified and Amg River Road, you can compare the effects of market volatilities on Stone Ridge and Amg River 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 Stone Ridge with a short position of Amg River. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stone Ridge and Amg River.

Diversification Opportunities for Stone Ridge and Amg River

0.81

Correlation Coefficient

Stone Ridge  Amg River

Very poor diversification

The 3 months correlation between Stone and Amg is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Stone Ridge Diversified and Amg River Road in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amg River Road and Stone Ridge 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 Stone Ridge Diversified are associated (or correlated) with Amg River. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amg River Road has no effect on the direction of Stone Ridge i.e., Stone Ridge and Amg River go up and down completely randomly.

Pair Corralation between Stone Ridge and Amg River

Assuming the 90 days horizon Stone Ridge Diversified is expected to generate 0.19 times more return on investment than Amg River. However, Stone Ridge Diversified is 5.31 times less risky than Amg River. It trades about 0.61 of its potential returns per unit of risk. Amg River Road is currently generating about 0.07 per unit of risk. If you would invest  1,118  in Stone Ridge Diversified on September 15, 2024 and sell it today you would earn a total of  20.00  from holding Stone Ridge Diversified or generate 1.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

Stone Ridge Diversified  vs.  Amg River Road

Stone Ridge Diversified

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Stone Ridge Diversified are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, Stone Ridge is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Amg River Road

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amg River Road are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Amg River may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Stone Ridge and Amg River

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

The idea behind Stone Ridge Diversified and Amg River Road 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.