Correlation Between Amazon CDR and Outback Goldfields

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

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

Diversification Opportunities for Amazon CDR and Outback Goldfields

-0.4

Correlation Coefficient

Amazon CDR  Outback Goldfields

Very good diversification

The 3 months correlation between Amazon and Outback is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Amazon CDR and Outback Goldfields Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Outback Goldfields Corp 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 Outback Goldfields. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Outback Goldfields Corp has no effect on the direction of Amazon CDR i.e., Amazon CDR and Outback Goldfields go up and down completely randomly.

Pair Corralation between Amazon CDR and Outback Goldfields

Assuming the 90 days trading horizon Amazon CDR is expected to generate 0.27 times more return on investment than Outback Goldfields. However, Amazon CDR is 3.68 times less risky than Outback Goldfields. It trades about 0.09 of its potential returns per unit of risk. Outback Goldfields Corp is currently generating about 0.01 per unit of risk. If you would invest  1,623  in Amazon CDR on September 23, 2024 and sell it today you would earn a total of  1,052  from holding Amazon CDR or generate 64.82% return on investment over 90 days.

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

Amazon CDR  vs.  Outback Goldfields Corp

Amazon CDR

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon CDR are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal technical and fundamental indicators, Amazon CDR exhibited solid returns over the last few months and may actually be approaching a breakup point.

Outback Goldfields Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Outback Goldfields Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Outback Goldfields showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amazon CDR and Outback Goldfields

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

The idea behind Amazon CDR and Outback Goldfields Corp 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.