Correlation Between Amazon CDR and Western Forest
Can any of the company-specific risk be diversified away by investing in both Amazon CDR and Western Forest 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 Western Forest into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon CDR and Western Forest Products, you can compare the effects of market volatilities on Amazon CDR and Western Forest 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 Western Forest. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon CDR and Western Forest.
Diversification Opportunities for Amazon CDR and Western Forest
-0.8 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Amazon and Western is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Amazon CDR and Western Forest Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Forest Products 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 Western Forest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Forest Products has no effect on the direction of Amazon CDR i.e., Amazon CDR and Western Forest go up and down completely randomly.
Pair Corralation between Amazon CDR and Western Forest
Assuming the 90 days trading horizon Amazon CDR is expected to generate 0.71 times more return on investment than Western Forest. However, Amazon CDR is 1.41 times less risky than Western Forest. It trades about 0.41 of its potential returns per unit of risk. Western Forest Products is currently generating about -0.15 per unit of risk. If you would invest 2,405 in Amazon CDR on September 18, 2024 and sell it today you would earn a total of 344.00 from holding Amazon CDR or generate 14.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Amazon CDR vs. Western Forest Products
Performance |
| Timeline |
| Amazon CDR |
| Western Forest Products |
Amazon CDR and Western Forest Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon CDR and Western Forest
The main advantage of trading using opposite Amazon CDR and Western Forest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon CDR position performs unexpectedly, Western Forest 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 Western Forest will offset losses from the drop in Western Forest's long position.| Amazon CDR vs. Highwood Asset Management | Amazon CDR vs. Bip Investment Corp | Amazon CDR vs. Westshore Terminals Investment | Amazon CDR vs. Information Services |
| Western Forest vs. Richelieu Hardware | Western Forest vs. CCL Industries | Western Forest vs. Stantec | Western Forest vs. Gildan Activewear |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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