Correlation Between Amg Southernsun and Hodges Small

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

By analyzing existing cross correlation between Amg Southernsun Small and Hodges Small Cap, you can compare the effects of market volatilities on Amg Southernsun and Hodges Small 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 Amg Southernsun with a short position of Hodges Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amg Southernsun and Hodges Small.

Diversification Opportunities for Amg Southernsun and Hodges Small

0.73

Correlation Coefficient

Amg Southernsun  Hodges Small

Poor diversification

The 3 months correlation between Amg and Hodges is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Amg Southernsun Small and Hodges Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hodges Small Cap and Amg Southernsun 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 Amg Southernsun Small are associated (or correlated) with Hodges Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hodges Small Cap has no effect on the direction of Amg Southernsun i.e., Amg Southernsun and Hodges Small go up and down completely randomly.

Pair Corralation between Amg Southernsun and Hodges Small

Assuming the 90 days horizon Amg Southernsun is expected to generate 1.54 times less return on investment than Hodges Small. But when comparing it to its historical volatility, Amg Southernsun Small is 1.16 times less risky than Hodges Small. It trades about 0.21 of its potential returns per unit of risk. Hodges Small Cap is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  2,382  in Hodges Small Cap on August 31, 2024 and sell it today you would earn a total of  228.00  from holding Hodges Small Cap or generate 9.57% return on investment over 90 days.

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

Amg Southernsun Small  vs.  Hodges Small Cap

Amg Southernsun Small

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Amg Southernsun Small are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Amg Southernsun is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hodges Small Cap

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hodges Small Cap are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Hodges Small showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amg Southernsun and Hodges Small

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

The idea behind Amg Southernsun Small and Hodges Small Cap 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.