Correlation Between Amazon and Outcrop Gold
Can any of the company-specific risk be diversified away by investing in both Amazon and Outcrop Gold 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 Outcrop Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and Outcrop Gold Corp, you can compare the effects of market volatilities on Amazon and Outcrop Gold 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 Outcrop Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Outcrop Gold.
Diversification Opportunities for Amazon and Outcrop Gold
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Amazon and Outcrop is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Outcrop Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Outcrop Gold Corp 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 Outcrop Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Outcrop Gold Corp has no effect on the direction of Amazon i.e., Amazon and Outcrop Gold go up and down completely randomly.
Pair Corralation between Amazon and Outcrop Gold
Given the investment horizon of 90 days Amazon Inc is expected to generate 0.37 times more return on investment than Outcrop Gold. However, Amazon Inc is 2.72 times less risky than Outcrop Gold. It trades about 0.19 of its potential returns per unit of risk. Outcrop Gold Corp is currently generating about -0.09 per unit of risk. If you would invest 19,578 in Amazon Inc on September 4, 2024 and sell it today you would earn a total of 1,493 from holding Amazon Inc or generate 7.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Amazon Inc vs. Outcrop Gold Corp
Performance |
| Timeline |
| Amazon Inc |
| Outcrop Gold Corp |
Amazon and Outcrop Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and Outcrop Gold
The main advantage of trading using opposite Amazon and Outcrop Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Outcrop Gold 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 Outcrop Gold will offset losses from the drop in Outcrop Gold's long position.The idea behind Amazon Inc and Outcrop Gold Corp 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.| Outcrop Gold vs. CMC Metals | Outcrop Gold vs. Capitan Mining | Outcrop Gold vs. Cartier Iron Corp | Outcrop Gold vs. Alien Metals |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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