Correlation Between Amazon and China New
Can any of the company-specific risk be diversified away by investing in both Amazon and China New 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 and China New into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and China New Energy, you can compare the effects of market volatilities on Amazon and China New 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 with a short position of China New. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and China New.
Diversification Opportunities for Amazon and China New
Excellent diversification
The 3 months correlation between Amazon and China is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and China New Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China New Energy and Amazon 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 Inc are associated (or correlated) with China New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China New Energy has no effect on the direction of Amazon i.e., Amazon and China New go up and down completely randomly.
Pair Corralation between Amazon and China New
Given the investment horizon of 90 days Amazon is expected to generate 14.14 times less return on investment than China New. But when comparing it to its historical volatility, Amazon Inc is 17.79 times less risky than China New. It trades about 0.24 of its potential returns per unit of risk. China New Energy is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 0.40 in China New Energy on September 1, 2024 and sell it today you would earn a total of 0.40 from holding China New Energy or generate 100.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Amazon Inc vs. China New Energy
Performance |
| Timeline |
| Amazon Inc |
| China New Energy |
Amazon and China New Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and China New
The main advantage of trading using opposite Amazon and China New positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, China New 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 China New will offset losses from the drop in China New's long position.The idea behind Amazon Inc and China New Energy pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| China New vs. Sonic Healthcare Ltd | China New vs. Lonza Group | China New vs. Charles River Laboratories | China New vs. Qiagen NV |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
Other Complementary Tools
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Money Managers Screen money managers from public funds and ETFs managed around the world |