Correlation Between Amazon CDR and North American

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

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

Diversification Opportunities for Amazon CDR and North American

-0.13

Correlation Coefficient

Amazon CDR  North American

Good diversification

The 3 months correlation between Amazon and North is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Amazon CDR and North American Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North American Financial 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 North American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North American Financial has no effect on the direction of Amazon CDR i.e., Amazon CDR and North American go up and down completely randomly.

Pair Corralation between Amazon CDR and North American

Assuming the 90 days trading horizon Amazon CDR is expected to generate 6.11 times less return on investment than North American. In addition to that, Amazon CDR is 6.1 times more volatile than North American Financial. It trades about 0.01 of its total potential returns per unit of risk. North American Financial is currently generating about 0.43 per unit of volatility. If you would invest  1,037  in North American Financial on December 2, 2024 and sell it today you would earn a total of  78.00  from holding North American Financial or generate 7.52% 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.  North American Financial

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.

North American Financial

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in North American Financial are ranked lower than 33 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, North American may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Amazon CDR and North American

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

The idea behind Amazon CDR and North American Financial 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.