Correlation Between Amazon CDR and Goodfellow

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

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

Diversification Opportunities for Amazon CDR and Goodfellow

-0.55

Correlation Coefficient

Amazon CDR  Goodfellow

Excellent diversification

The 3 months correlation between Amazon and Goodfellow is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Amazon CDR and Goodfellow in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goodfellow 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 Goodfellow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goodfellow has no effect on the direction of Amazon CDR i.e., Amazon CDR and Goodfellow go up and down completely randomly.

Pair Corralation between Amazon CDR and Goodfellow

Assuming the 90 days trading horizon Amazon CDR is expected to generate 0.93 times more return on investment than Goodfellow. However, Amazon CDR is 1.08 times less risky than Goodfellow. It trades about 0.01 of its potential returns per unit of risk. Goodfellow is currently generating about -0.11 per unit of risk. If you would invest  2,477  in Amazon CDR on November 29, 2024 and sell it today you would lose (1.00) from holding Amazon CDR or give up 0.04% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Amazon CDR  vs.  Goodfellow

Amazon CDR

Risk-Adjusted Performance

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 latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Goodfellow

Risk-Adjusted Performance

Very Weak

Over the last 90 days Goodfellow has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's essential 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 Goodfellow

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

The idea behind Amazon CDR and Goodfellow 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.