Correlation Between Vanguard Small and Amg River

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

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

Diversification Opportunities for Vanguard Small and Amg River

0.97

Correlation Coefficient

Vanguard Small  Amg River

Almost no diversification

The 3 months correlation between Vanguard and Amg is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Value 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 Vanguard Small 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 Vanguard Small Cap Value 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 Vanguard Small i.e., Vanguard Small and Amg River go up and down completely randomly.

Pair Corralation between Vanguard Small and Amg River

Assuming the 90 days horizon Vanguard Small Cap Value is expected to under-perform the Amg River. In addition to that, Vanguard Small is 1.06 times more volatile than Amg River Road. It trades about -0.02 of its total potential returns per unit of risk. Amg River Road is currently generating about 0.02 per unit of volatility. If you would invest  1,736  in Amg River Road on September 13, 2024 and sell it today you would earn a total of  3.00  from holding Amg River Road or generate 0.17% return on investment over 90 days.

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

Vanguard Small Cap Value  vs.  Amg River Road

Vanguard Small Cap

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Small Cap Value are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly abnormal forward indicators, Vanguard Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Amg River Road

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amg River Road are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Amg River showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vanguard Small and Amg River

The main advantage of trading using opposite Vanguard Small and Amg River positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small 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 Vanguard Small Cap Value 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.