Correlation Between AMS Small and Koninklijke BAM

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

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

Diversification Opportunities for AMS Small and Koninklijke BAM

0.36

Correlation Coefficient

AMS Small  Koninklijke BAM

Weak diversification

The 3 months correlation between AMS and Koninklijke is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding AMS Small Cap and Koninklijke BAM Groep in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Koninklijke BAM Groep and AMS 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 AMS Small Cap are associated (or correlated) with Koninklijke BAM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Koninklijke BAM Groep has no effect on the direction of AMS Small i.e., AMS Small and Koninklijke BAM go up and down completely randomly.

Pair Corralation between AMS Small and Koninklijke BAM

Assuming the 90 days trading horizon AMS Small Cap is expected to under-perform the Koninklijke BAM. But the index apears to be less risky and, when comparing its historical volatility, AMS Small Cap is 2.93 times less risky than Koninklijke BAM. The index trades about -0.03 of its potential returns per unit of risk. The Koninklijke BAM Groep is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  328.00  in Koninklijke BAM Groep on February 2, 2024 and sell it today you would earn a total of  55.00  from holding Koninklijke BAM Groep or generate 16.77% return on investment over 90 days.

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

AMS Small Cap  vs.  Koninklijke BAM Groep

Pair Trading with AMS Small and Koninklijke BAM

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

The idea behind AMS Small Cap and Koninklijke BAM Groep 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 Stocks Directory module to find actively traded stocks across global markets.