Correlation Between Amazon CDR and Stellar AfricaGold
Can any of the company-specific risk be diversified away by investing in both Amazon CDR and Stellar AfricaGold 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 Stellar AfricaGold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon CDR and Stellar AfricaGold, you can compare the effects of market volatilities on Amazon CDR and Stellar AfricaGold 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 Stellar AfricaGold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon CDR and Stellar AfricaGold.
Diversification Opportunities for Amazon CDR and Stellar AfricaGold
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Amazon and Stellar is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Amazon CDR and Stellar AfricaGold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stellar AfricaGold 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 Stellar AfricaGold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stellar AfricaGold has no effect on the direction of Amazon CDR i.e., Amazon CDR and Stellar AfricaGold go up and down completely randomly.
Pair Corralation between Amazon CDR and Stellar AfricaGold
Assuming the 90 days trading horizon Amazon CDR is expected to generate 5.68 times less return on investment than Stellar AfricaGold. But when comparing it to its historical volatility, Amazon CDR is 6.34 times less risky than Stellar AfricaGold. It trades about 0.11 of its potential returns per unit of risk. Stellar AfricaGold is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 9.00 in Stellar AfricaGold on August 26, 2024 and sell it today you would earn a total of 1.00 from holding Stellar AfricaGold or generate 11.11% 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. Stellar AfricaGold
Performance |
| Timeline |
| Amazon CDR |
| Stellar AfricaGold |
Amazon CDR and Stellar AfricaGold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon CDR and Stellar AfricaGold
The main advantage of trading using opposite Amazon CDR and Stellar AfricaGold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon CDR position performs unexpectedly, Stellar AfricaGold 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 Stellar AfricaGold will offset losses from the drop in Stellar AfricaGold'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 |
| Stellar AfricaGold vs. Richmond Minerals | Stellar AfricaGold vs. Societe d Exploration | Stellar AfricaGold vs. Tesoro Minerals 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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