Correlation Between Amazon CDR and Empire Company

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

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

Diversification Opportunities for Amazon CDR and Empire Company

0.76

Correlation Coefficient

Amazon CDR  Empire Company

Poor diversification

The 3 months correlation between Amazon and Empire is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Amazon CDR and Empire Company Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Empire Limited 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 Empire Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Empire Limited has no effect on the direction of Amazon CDR i.e., Amazon CDR and Empire Company go up and down completely randomly.

Pair Corralation between Amazon CDR and Empire Company

Assuming the 90 days trading horizon Amazon CDR is expected to generate 1.51 times more return on investment than Empire Company. However, Amazon CDR is 1.51 times more volatile than Empire Company Limited. It trades about 0.15 of its potential returns per unit of risk. Empire Company Limited is currently generating about 0.16 per unit of risk. If you would invest  2,105  in Amazon CDR on August 31, 2024 and sell it today you would earn a total of  372.00  from holding Amazon CDR or generate 17.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Amazon CDR  vs.  Empire Company Limited

Amazon CDR

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon CDR are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Amazon CDR exhibited solid returns over the last few months and may actually be approaching a breakup point.

Empire Limited

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Empire Company Limited are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Empire Company may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Amazon CDR and Empire Company

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

The idea behind Amazon CDR and Empire Company Limited 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.