Correlation Between Main Thematic and Amplify Thematic

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

By analyzing existing cross correlation between Main Thematic Innovation and Amplify Thematic All Stars, you can compare the effects of market volatilities on Main Thematic and Amplify Thematic 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 Main Thematic with a short position of Amplify Thematic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Main Thematic and Amplify Thematic.

Diversification Opportunities for Main Thematic and Amplify Thematic

0.96

Correlation Coefficient

Main Thematic  Amplify Thematic

Almost no diversification

The 3 months correlation between Main and Amplify is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Main Thematic Innovation and Amplify Thematic All Stars in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amplify Thematic All and Main Thematic 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 Main Thematic Innovation are associated (or correlated) with Amplify Thematic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amplify Thematic All has no effect on the direction of Main Thematic i.e., Main Thematic and Amplify Thematic go up and down completely randomly.

Pair Corralation between Main Thematic and Amplify Thematic

Given the investment horizon of 90 days Main Thematic Innovation is expected to generate 1.51 times more return on investment than Amplify Thematic. However, Main Thematic is 1.51 times more volatile than Amplify Thematic All Stars. It trades about 0.12 of its potential returns per unit of risk. Amplify Thematic All Stars is currently generating about 0.1 per unit of risk. If you would invest  2,064  in Main Thematic Innovation on October 20, 2024 and sell it today you would earn a total of  98.00  from holding Main Thematic Innovation or generate 4.75% return on investment over 90 days.

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

Main Thematic Innovation  vs.  Amplify Thematic All Stars

Main Thematic Innovation

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Main Thematic Innovation are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Main Thematic unveiled solid returns over the last few months and may actually be approaching a breakup point.

Amplify Thematic All

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Amplify Thematic All Stars are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Amplify Thematic may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Main Thematic and Amplify Thematic

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

The idea behind Main Thematic Innovation and Amplify Thematic All Stars 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.