Correlation Between Amazon CDR and Rackla Metals

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

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

Diversification Opportunities for Amazon CDR and Rackla Metals

-0.64

Correlation Coefficient

Amazon CDR  Rackla Metals

Excellent diversification

The 3 months correlation between Amazon and Rackla is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Amazon CDR and Rackla Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rackla Metals 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 Rackla Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rackla Metals has no effect on the direction of Amazon CDR i.e., Amazon CDR and Rackla Metals go up and down completely randomly.

Pair Corralation between Amazon CDR and Rackla Metals

Assuming the 90 days trading horizon Amazon CDR is expected to under-perform the Rackla Metals. But the stock apears to be less risky and, when comparing its historical volatility, Amazon CDR is 4.3 times less risky than Rackla Metals. The stock trades about -0.12 of its potential returns per unit of risk. The Rackla Metals is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  11.00  in Rackla Metals on December 30, 2024 and sell it today you would earn a total of  11.00  from holding Rackla Metals or generate 100.0% return on investment over 90 days.

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

Amazon CDR  vs.  Rackla Metals

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 unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Rackla Metals

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Rackla Metals are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Rackla Metals showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amazon CDR and Rackla Metals

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

The idea behind Amazon CDR and Rackla Metals 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.