Correlation Between Amazon and Dear Cashmere
Can any of the company-specific risk be diversified away by investing in both Amazon and Dear Cashmere 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 Dear Cashmere into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and Dear Cashmere Holding, you can compare the effects of market volatilities on Amazon and Dear Cashmere 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 Dear Cashmere. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Dear Cashmere.
Diversification Opportunities for Amazon and Dear Cashmere
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Amazon and Dear is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Dear Cashmere Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dear Cashmere Holding 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 Dear Cashmere. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dear Cashmere Holding has no effect on the direction of Amazon i.e., Amazon and Dear Cashmere go up and down completely randomly.
Pair Corralation between Amazon and Dear Cashmere
Given the investment horizon of 90 days Amazon is expected to generate 11.42 times less return on investment than Dear Cashmere. But when comparing it to its historical volatility, Amazon Inc is 25.44 times less risky than Dear Cashmere. It trades about 0.11 of its potential returns per unit of risk. Dear Cashmere Holding is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 22.00 in Dear Cashmere Holding on November 5, 2024 and sell it today you would lose (11.00) from holding Dear Cashmere Holding or give up 50.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Amazon Inc vs. Dear Cashmere Holding
Performance |
| Timeline |
| Amazon Inc |
| Dear Cashmere Holding |
Amazon and Dear Cashmere Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and Dear Cashmere
The main advantage of trading using opposite Amazon and Dear Cashmere positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Dear Cashmere 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 Dear Cashmere will offset losses from the drop in Dear Cashmere's long position.The idea behind Amazon Inc and Dear Cashmere Holding 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.| Dear Cashmere vs. One World Universe | Dear Cashmere vs. All American Pet | Dear Cashmere vs. Ilustrato Pictures | Dear Cashmere vs. Quality Industrial 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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