Correlation Between Amazon CDR and First Quantum
Can any of the company-specific risk be diversified away by investing in both Amazon CDR and First Quantum 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 First Quantum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon CDR and First Quantum Minerals, you can compare the effects of market volatilities on Amazon CDR and First Quantum 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 First Quantum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon CDR and First Quantum.
Diversification Opportunities for Amazon CDR and First Quantum
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Amazon and First is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Amazon CDR and First Quantum Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Quantum Minerals 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 First Quantum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Quantum Minerals has no effect on the direction of Amazon CDR i.e., Amazon CDR and First Quantum go up and down completely randomly.
Pair Corralation between Amazon CDR and First Quantum
Assuming the 90 days trading horizon Amazon CDR is expected to generate 0.72 times more return on investment than First Quantum. However, Amazon CDR is 1.39 times less risky than First Quantum. It trades about 0.23 of its potential returns per unit of risk. First Quantum Minerals is currently generating about 0.11 per unit of risk. If you would invest 2,222 in Amazon CDR on September 1, 2024 and sell it today you would earn a total of 255.00 from holding Amazon CDR or generate 11.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Amazon CDR vs. First Quantum Minerals
Performance |
| Timeline |
| Amazon CDR |
| First Quantum Minerals |
Amazon CDR and First Quantum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon CDR and First Quantum
The main advantage of trading using opposite Amazon CDR and First Quantum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon CDR position performs unexpectedly, First Quantum 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 First Quantum will offset losses from the drop in First Quantum's long position.| Amazon CDR vs. iShares Canadian HYBrid | Amazon CDR vs. Altagas Cum Red | Amazon CDR vs. European Residential Real | Amazon CDR vs. iShares Fundamental Hedged |
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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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