Correlation Between Affiliated Managers and Interactive Brokers

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

By analyzing existing cross correlation between Affiliated Managers Group and Interactive Brokers Group, you can compare the effects of market volatilities on Affiliated Managers and Interactive Brokers 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 Affiliated Managers with a short position of Interactive Brokers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Affiliated Managers and Interactive Brokers.

Diversification Opportunities for Affiliated Managers and Interactive Brokers

0.68

Correlation Coefficient

Affiliated Managers  Interactive Brokers

Poor diversification

The 3 months correlation between Affiliated and Interactive is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Affiliated Managers Group and Interactive Brokers Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Interactive Brokers and Affiliated Managers 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 Affiliated Managers Group are associated (or correlated) with Interactive Brokers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Interactive Brokers has no effect on the direction of Affiliated Managers i.e., Affiliated Managers and Interactive Brokers go up and down completely randomly.

Pair Corralation between Affiliated Managers and Interactive Brokers

Considering the 90-day investment horizon Affiliated Managers Group is expected to under-perform the Interactive Brokers. But the stock apears to be less risky and, when comparing its historical volatility, Affiliated Managers Group is 1.29 times less risky than Interactive Brokers. The stock trades about -0.13 of its potential returns per unit of risk. The Interactive Brokers Group is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  11,267  in Interactive Brokers Group on February 5, 2024 and sell it today you would earn a total of  745.00  from holding Interactive Brokers Group or generate 6.61% return on investment over 90 days.

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

Affiliated Managers Group  vs.  Interactive Brokers Group

Affiliated Managers

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Affiliated Managers Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable primary indicators, Affiliated Managers is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Interactive Brokers

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Interactive Brokers Group are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak forward-looking signals, Interactive Brokers reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Affiliated Managers and Interactive Brokers

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

The idea behind Affiliated Managers Group and Interactive Brokers Group 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .