Correlation Between Mid Cap and Amg Managers

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

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

Diversification Opportunities for Mid Cap and Amg Managers

0.88

Correlation Coefficient

Mid Cap  Amg Managers

Very poor diversification

The 3 months correlation between Mid and Amg is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap Value and Amg Managers Fairpointe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amg Managers Fairpointe and Mid Cap 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 Mid Cap Value are associated (or correlated) with Amg Managers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amg Managers Fairpointe has no effect on the direction of Mid Cap i.e., Mid Cap and Amg Managers go up and down completely randomly.

Pair Corralation between Mid Cap and Amg Managers

Assuming the 90 days horizon Mid Cap Value is expected to generate 1.0 times more return on investment than Amg Managers. However, Mid Cap is 1.0 times more volatile than Amg Managers Fairpointe. It trades about -0.07 of its potential returns per unit of risk. Amg Managers Fairpointe is currently generating about -0.26 per unit of risk. If you would invest  1,587  in Mid Cap Value on February 5, 2024 and sell it today you would lose (18.00) from holding Mid Cap Value or give up 1.13% of portfolio value over 90 days.

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

Mid Cap Value  vs.  Amg Managers Fairpointe

Mid Cap Value

Risk-Adjusted Performance

6 of 100

Modest

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

Amg Managers Fairpointe

Risk-Adjusted Performance

6 of 100

Modest

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

Pair Trading with Mid Cap and Amg Managers

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

The idea behind Mid Cap Value and Amg Managers Fairpointe 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.