Correlation Between Amazon CDR and Golden Arrow
Can any of the company-specific risk be diversified away by investing in both Amazon CDR and Golden Arrow 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 Golden Arrow into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon CDR and Golden Arrow Resources, you can compare the effects of market volatilities on Amazon CDR and Golden Arrow 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 Golden Arrow. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon CDR and Golden Arrow.
Diversification Opportunities for Amazon CDR and Golden Arrow
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Amazon and Golden is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Amazon CDR and Golden Arrow Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Arrow Resources 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 Golden Arrow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Arrow Resources has no effect on the direction of Amazon CDR i.e., Amazon CDR and Golden Arrow go up and down completely randomly.
Pair Corralation between Amazon CDR and Golden Arrow
Assuming the 90 days trading horizon Amazon CDR is expected to generate 1.25 times less return on investment than Golden Arrow. But when comparing it to its historical volatility, Amazon CDR is 4.35 times less risky than Golden Arrow. It trades about 0.13 of its potential returns per unit of risk. Golden Arrow Resources is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 5.00 in Golden Arrow Resources on September 2, 2024 and sell it today you would earn a total of 0.00 from holding Golden Arrow Resources or generate 0.0% 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. Golden Arrow Resources
Performance |
| Timeline |
| Amazon CDR |
| Golden Arrow Resources |
Amazon CDR and Golden Arrow Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon CDR and Golden Arrow
The main advantage of trading using opposite Amazon CDR and Golden Arrow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon CDR position performs unexpectedly, Golden Arrow 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 Golden Arrow will offset losses from the drop in Golden Arrow'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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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