Correlation Between Amazon CDR and Conifex Timber

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

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

Diversification Opportunities for Amazon CDR and Conifex Timber

-0.25

Correlation Coefficient

Amazon CDR  Conifex Timber

Very good diversification

The 3 months correlation between Amazon and Conifex is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Amazon CDR and Conifex Timber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Conifex Timber and Amazon CDR 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 CDR are associated (or correlated) with Conifex Timber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Conifex Timber has no effect on the direction of Amazon CDR i.e., Amazon CDR and Conifex Timber go up and down completely randomly.

Pair Corralation between Amazon CDR and Conifex Timber

Assuming the 90 days trading horizon Amazon CDR is expected to generate 2.88 times less return on investment than Conifex Timber. But when comparing it to its historical volatility, Amazon CDR is 2.67 times less risky than Conifex Timber. It trades about 0.01 of its potential returns per unit of risk. Conifex Timber is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  38.00  in Conifex Timber on December 2, 2024 and sell it today you would lose (1.00) from holding Conifex Timber or give up 2.63% of portfolio value over 90 days.

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

Amazon CDR  vs.  Conifex Timber

Amazon CDR

Risk-Adjusted Performance

Very Weak

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

Conifex Timber

Risk-Adjusted Performance

Very Weak

Over the last 90 days Conifex Timber has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Conifex Timber is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Amazon CDR and Conifex Timber

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

The idea behind Amazon CDR and Conifex Timber 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 Directory module to find actively traded commodities issued by global exchanges.