Correlation Between Amazon and CSL
Can any of the company-specific risk be diversified away by investing in both Amazon and CSL 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 Amazon and CSL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and CSL LTD SPONADR, you can compare the effects of market volatilities on Amazon and CSL 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 Amazon with a short position of CSL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and CSL.
Diversification Opportunities for Amazon and CSL
Excellent diversification
The 3 months correlation between Amazon and CSL is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and CSL LTD SPONADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSL LTD SPONADR and Amazon 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 Amazon Inc are associated (or correlated) with CSL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSL LTD SPONADR has no effect on the direction of Amazon i.e., Amazon and CSL go up and down completely randomly.
Pair Corralation between Amazon and CSL
Assuming the 90 days trading horizon Amazon Inc is expected to generate 1.27 times more return on investment than CSL. However, Amazon is 1.27 times more volatile than CSL LTD SPONADR. It trades about 0.18 of its potential returns per unit of risk. CSL LTD SPONADR is currently generating about 0.0 per unit of risk. If you would invest 17,510 in Amazon Inc on August 28, 2024 and sell it today you would earn a total of 1,588 from holding Amazon Inc or generate 9.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Amazon Inc vs. CSL LTD SPONADR
Performance |
| Timeline |
| Amazon Inc |
| CSL LTD SPONADR |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Amazon and CSL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and CSL
The main advantage of trading using opposite Amazon and CSL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, CSL 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 CSL will offset losses from the drop in CSL's long position.The idea behind Amazon Inc and CSL LTD SPONADR 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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