Correlation Between DAIDO METAL and Amazon

Can any of the company-specific risk be diversified away by investing in both DAIDO METAL and Amazon 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 DAIDO METAL and Amazon into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between DAIDO METAL TD and Amazon Inc, you can compare the effects of market volatilities on DAIDO METAL and Amazon 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 DAIDO METAL with a short position of Amazon. Check out your portfolio center. Please also check ongoing floating volatility patterns of DAIDO METAL and Amazon.

Diversification Opportunities for DAIDO METAL and Amazon

0.28

Correlation Coefficient

DAIDO METAL  Amazon

Modest diversification

The 3 months correlation between DAIDO and Amazon is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding DAIDO METAL TD and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc and DAIDO METAL 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 DAIDO METAL TD are associated (or correlated) with Amazon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amazon Inc has no effect on the direction of DAIDO METAL i.e., DAIDO METAL and Amazon go up and down completely randomly.

Pair Corralation between DAIDO METAL and Amazon

Assuming the 90 days horizon DAIDO METAL TD is expected to under-perform the Amazon. But the stock apears to be less risky and, when comparing its historical volatility, DAIDO METAL TD is 1.08 times less risky than Amazon. The stock trades about -0.22 of its potential returns per unit of risk. The Amazon Inc is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  21,280  in Amazon Inc on October 26, 2024 and sell it today you would earn a total of  995.00  from holding Amazon Inc or generate 4.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.74%
Values	Daily Returns

DAIDO METAL TD  vs.  Amazon Inc

DAIDO METAL TD

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in DAIDO METAL TD are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, DAIDO METAL is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Amazon Inc

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Amazon displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DAIDO METAL and Amazon

The main advantage of trading using opposite DAIDO METAL and Amazon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DAIDO METAL position performs unexpectedly, Amazon 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 will offset losses from the drop in Amazon's long position.

The idea behind DAIDO METAL TD and Amazon Inc 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.

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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.