Correlation Between Amazon CDR and Alaska Hydro
Can any of the company-specific risk be diversified away by investing in both Amazon CDR and Alaska Hydro 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 CDR and Alaska Hydro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon CDR and Alaska Hydro, you can compare the effects of market volatilities on Amazon CDR and Alaska Hydro 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 CDR with a short position of Alaska Hydro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon CDR and Alaska Hydro.
Diversification Opportunities for Amazon CDR and Alaska Hydro
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Amazon and Alaska is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Amazon CDR and Alaska Hydro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alaska Hydro and Amazon CDR 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 CDR are associated (or correlated) with Alaska Hydro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alaska Hydro has no effect on the direction of Amazon CDR i.e., Amazon CDR and Alaska Hydro go up and down completely randomly.
Pair Corralation between Amazon CDR and Alaska Hydro
Assuming the 90 days trading horizon Amazon CDR is expected to generate 11.2 times less return on investment than Alaska Hydro. But when comparing it to its historical volatility, Amazon CDR is 10.91 times less risky than Alaska Hydro. It trades about 0.09 of its potential returns per unit of risk. Alaska Hydro is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1.00 in Alaska Hydro on September 12, 2024 and sell it today you would earn a total of 0.50 from holding Alaska Hydro or generate 50.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Amazon CDR vs. Alaska Hydro
Performance |
| Timeline |
| Amazon CDR |
| Alaska Hydro |
Amazon CDR and Alaska Hydro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon CDR and Alaska Hydro
The main advantage of trading using opposite Amazon CDR and Alaska Hydro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon CDR position performs unexpectedly, Alaska Hydro 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 Alaska Hydro will offset losses from the drop in Alaska Hydro's long position.| Amazon CDR vs. Data Communications Management | Amazon CDR vs. Marimaca Copper Corp | Amazon CDR vs. Rogers Communications | Amazon CDR vs. Maple Leaf Foods |
| Alaska Hydro vs. Jamieson Wellness | Alaska Hydro vs. Globex Mining Enterprises | Alaska Hydro vs. Bausch Health Companies | Alaska Hydro vs. Mako Mining Corp |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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