Correlation Between Amazon CDR and Lara Exploration
Can any of the company-specific risk be diversified away by investing in both Amazon CDR and Lara Exploration 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 Lara Exploration into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon CDR and Lara Exploration, you can compare the effects of market volatilities on Amazon CDR and Lara Exploration 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 Lara Exploration. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon CDR and Lara Exploration.
Diversification Opportunities for Amazon CDR and Lara Exploration
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Amazon and Lara is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Amazon CDR and Lara Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lara Exploration 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 Lara Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lara Exploration has no effect on the direction of Amazon CDR i.e., Amazon CDR and Lara Exploration go up and down completely randomly.
Pair Corralation between Amazon CDR and Lara Exploration
Assuming the 90 days trading horizon Amazon CDR is expected to generate 1.82 times less return on investment than Lara Exploration. But when comparing it to its historical volatility, Amazon CDR is 1.95 times less risky than Lara Exploration. It trades about 0.15 of its potential returns per unit of risk. Lara Exploration is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 107.00 in Lara Exploration on September 2, 2024 and sell it today you would earn a total of 34.00 from holding Lara Exploration or generate 31.78% 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. Lara Exploration
Performance |
| Timeline |
| Amazon CDR |
| Lara Exploration |
Amazon CDR and Lara Exploration Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon CDR and Lara Exploration
The main advantage of trading using opposite Amazon CDR and Lara Exploration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon CDR position performs unexpectedly, Lara Exploration 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 Lara Exploration will offset losses from the drop in Lara Exploration'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 |
| Lara Exploration vs. Riverside Resources | Lara Exploration vs. Strategic Metals | Lara Exploration vs. Midland Exploration | Lara Exploration vs. Transition Metals 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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