Correlation Between Amazon CDR and US Financial
Can any of the company-specific risk be diversified away by investing in both Amazon CDR and US Financial 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 US Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon CDR and US Financial 15, you can compare the effects of market volatilities on Amazon CDR and US Financial 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 US Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon CDR and US Financial.
Diversification Opportunities for Amazon CDR and US Financial
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Amazon and FTU is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Amazon CDR and US Financial 15 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Financial 15 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 US Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Financial 15 has no effect on the direction of Amazon CDR i.e., Amazon CDR and US Financial go up and down completely randomly.
Pair Corralation between Amazon CDR and US Financial
Assuming the 90 days trading horizon Amazon CDR is expected to generate 11.15 times less return on investment than US Financial. But when comparing it to its historical volatility, Amazon CDR is 5.2 times less risky than US Financial. It trades about 0.14 of its potential returns per unit of risk. US Financial 15 is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 36.00 in US Financial 15 on August 28, 2024 and sell it today you would earn a total of 33.00 from holding US Financial 15 or generate 91.67% 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. US Financial 15
Performance |
| Timeline |
| Amazon CDR |
| US Financial 15 |
Amazon CDR and US Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon CDR and US Financial
The main advantage of trading using opposite Amazon CDR and US Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon CDR position performs unexpectedly, US Financial 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 US Financial will offset losses from the drop in US Financial's long position.| Amazon CDR vs. NVIDIA CDR | Amazon CDR vs. Apple Inc CDR | Amazon CDR vs. Microsoft Corp CDR | Amazon CDR vs. Alphabet Inc CDR |
| US Financial vs. NVIDIA CDR | US Financial vs. Apple Inc CDR | US Financial vs. Microsoft Corp CDR | US Financial vs. Amazon CDR |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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