Correlation Between Amazon and Nemak S

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

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

Diversification Opportunities for Amazon and Nemak S

0.35

Correlation Coefficient

Amazon  Nemak S

Weak diversification

The 3 months correlation between Amazon and Nemak is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Nemak S A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nemak S A 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 Nemak S. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nemak S A has no effect on the direction of Amazon i.e., Amazon and Nemak S go up and down completely randomly.

Pair Corralation between Amazon and Nemak S

Assuming the 90 days trading horizon Amazon is expected to generate 5.06 times less return on investment than Nemak S. But when comparing it to its historical volatility, Amazon Inc is 3.9 times less risky than Nemak S. It trades about 0.14 of its potential returns per unit of risk. Nemak S A is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  189.00  in Nemak S A on October 5, 2024 and sell it today you would earn a total of  37.00  from holding Nemak S A or generate 19.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Amazon Inc  vs.  Nemak S A

Amazon Inc

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Amazon Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly weak basic indicators, Amazon showed solid returns over the last few months and may actually be approaching a breakup point.

Nemak S A

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nemak S A are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, Nemak S sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amazon and Nemak S

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

The idea behind Amazon Inc and Nemak S A 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..