Correlation Between Amazon CDR and ProAm Explorations

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

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

Diversification Opportunities for Amazon CDR and ProAm Explorations

-0.86

Correlation Coefficient

Amazon CDR  ProAm Explorations

Pay attention - limited upside

The 3 months correlation between Amazon and ProAm is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Amazon CDR and ProAm Explorations Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProAm Explorations 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 ProAm Explorations. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProAm Explorations Corp has no effect on the direction of Amazon CDR i.e., Amazon CDR and ProAm Explorations go up and down completely randomly.

Pair Corralation between Amazon CDR and ProAm Explorations

Assuming the 90 days trading horizon Amazon CDR is expected to generate 4.4 times less return on investment than ProAm Explorations. But when comparing it to its historical volatility, Amazon CDR is 8.68 times less risky than ProAm Explorations. It trades about 0.1 of its potential returns per unit of risk. ProAm Explorations Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  10.00  in ProAm Explorations Corp on October 11, 2024 and sell it today you would lose (7.00) from holding ProAm Explorations Corp or give up 70.0% of portfolio value over 90 days.

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

Amazon CDR  vs.  ProAm Explorations Corp

Amazon CDR

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon CDR are ranked lower than 11 (%) 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.

ProAm Explorations Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProAm Explorations Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Amazon CDR and ProAm Explorations

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

The idea behind Amazon CDR and ProAm Explorations 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.