Correlation Between Amazon and Rock Tech
Can any of the company-specific risk be diversified away by investing in both Amazon and Rock Tech 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 Rock Tech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and Rock Tech Lithium, you can compare the effects of market volatilities on Amazon and Rock Tech 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 Rock Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Rock Tech.
Diversification Opportunities for Amazon and Rock Tech
Very good diversification
The 3 months correlation between Amazon and Rock is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Rock Tech Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rock Tech Lithium 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 Rock Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rock Tech Lithium has no effect on the direction of Amazon i.e., Amazon and Rock Tech go up and down completely randomly.
Pair Corralation between Amazon and Rock Tech
Given the investment horizon of 90 days Amazon Inc is expected to generate 0.48 times more return on investment than Rock Tech. However, Amazon Inc is 2.1 times less risky than Rock Tech. It trades about 0.17 of its potential returns per unit of risk. Rock Tech Lithium is currently generating about -0.05 per unit of risk. If you would invest 18,196 in Amazon Inc on September 3, 2024 and sell it today you would earn a total of 2,593 from holding Amazon Inc or generate 14.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 97.67% |
| Values | Daily Returns |
Amazon Inc vs. Rock Tech Lithium
Performance |
| Timeline |
| Amazon Inc |
| Rock Tech Lithium |
Amazon and Rock Tech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and Rock Tech
The main advantage of trading using opposite Amazon and Rock Tech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Rock Tech 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 Rock Tech will offset losses from the drop in Rock Tech's long position.The idea behind Amazon Inc and Rock Tech Lithium 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.| Rock Tech vs. Mineral Resources Limited | Rock Tech vs. Liontown Resources Limited | Rock Tech vs. American Lithium Corp | Rock Tech vs. ADRIATIC METALS LS 013355 |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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