Correlation Between Amazon and WESTERN COPPER

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

By analyzing existing cross correlation between Amazon Inc and WESTERN PER, you can compare the effects of market volatilities on Amazon and WESTERN COPPER 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 WESTERN COPPER. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and WESTERN COPPER.

Diversification Opportunities for Amazon and WESTERN COPPER

-0.39

Correlation Coefficient

Amazon  WESTERN COPPER

Very good diversification

The 3 months correlation between Amazon and WESTERN is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and WESTERN PER in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WESTERN COPPER 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 WESTERN COPPER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WESTERN COPPER has no effect on the direction of Amazon i.e., Amazon and WESTERN COPPER go up and down completely randomly.

Pair Corralation between Amazon and WESTERN COPPER

Assuming the 90 days trading horizon Amazon Inc is expected to generate 0.59 times more return on investment than WESTERN COPPER. However, Amazon Inc is 1.7 times less risky than WESTERN COPPER. It trades about 0.1 of its potential returns per unit of risk. WESTERN PER is currently generating about -0.02 per unit of risk. If you would invest  11,616  in Amazon Inc on October 24, 2024 and sell it today you would earn a total of  10,794  from holding Amazon Inc or generate 92.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Amazon Inc  vs.  WESTERN PER

Amazon Inc

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Amazon displayed solid returns over the last few months and may actually be approaching a breakup point.

WESTERN COPPER

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WESTERN PER has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, WESTERN COPPER is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Amazon and WESTERN COPPER

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

The idea behind Amazon Inc and WESTERN PER 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..