Correlation Between Amazon CDR and Champion Iron

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

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

Diversification Opportunities for Amazon CDR and Champion Iron

-0.18

Correlation Coefficient

Amazon CDR  Champion Iron

Good diversification

The 3 months correlation between Amazon and Champion is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Amazon CDR and Champion Iron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Champion Iron 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 Champion Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Champion Iron has no effect on the direction of Amazon CDR i.e., Amazon CDR and Champion Iron go up and down completely randomly.

Pair Corralation between Amazon CDR and Champion Iron

Assuming the 90 days trading horizon Amazon CDR is expected to generate 0.85 times more return on investment than Champion Iron. However, Amazon CDR is 1.17 times less risky than Champion Iron. It trades about 0.01 of its potential returns per unit of risk. Champion Iron is currently generating about -0.05 per unit of risk. If you would invest  2,508  in Amazon CDR on December 1, 2024 and sell it today you would earn a total of  8.00  from holding Amazon CDR or generate 0.32% return on investment over 90 days.

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

Amazon CDR  vs.  Champion Iron

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.

Champion Iron

Risk-Adjusted Performance

Very Weak

Over the last 90 days Champion Iron has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Amazon CDR and Champion Iron

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

The idea behind Amazon CDR and Champion Iron 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.