Correlation Between Leons Furniture and Amazon CDR
Can any of the company-specific risk be diversified away by investing in both Leons Furniture and Amazon CDR 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 Leons Furniture and Amazon CDR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Leons Furniture Limited and Amazon CDR, you can compare the effects of market volatilities on Leons Furniture and Amazon CDR 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 Leons Furniture with a short position of Amazon CDR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leons Furniture and Amazon CDR.
Diversification Opportunities for Leons Furniture and Amazon CDR
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Leons and Amazon is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Leons Furniture Limited and Amazon CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon CDR and Leons Furniture 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 Leons Furniture Limited are associated (or correlated) with Amazon CDR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amazon CDR has no effect on the direction of Leons Furniture i.e., Leons Furniture and Amazon CDR go up and down completely randomly.
Pair Corralation between Leons Furniture and Amazon CDR
Assuming the 90 days trading horizon Leons Furniture is expected to generate 1.6 times less return on investment than Amazon CDR. In addition to that, Leons Furniture is 1.08 times more volatile than Amazon CDR. It trades about 0.05 of its total potential returns per unit of risk. Amazon CDR is currently generating about 0.08 per unit of volatility. If you would invest 1,500 in Amazon CDR on September 2, 2024 and sell it today you would earn a total of 977.00 from holding Amazon CDR or generate 65.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Leons Furniture Limited vs. Amazon CDR
Performance |
| Timeline |
| Leons Furniture |
| Amazon CDR |
Leons Furniture and Amazon CDR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Leons Furniture and Amazon CDR
The main advantage of trading using opposite Leons Furniture and Amazon CDR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leons Furniture position performs unexpectedly, Amazon CDR 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 Amazon CDR will offset losses from the drop in Amazon CDR's long position.| Leons Furniture vs. High Liner Foods | Leons Furniture vs. Richelieu Hardware | Leons Furniture vs. North West | Leons Furniture vs. Toromont Industries |
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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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