Correlation Between Amazon CDR and RioCan Real

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

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

Diversification Opportunities for Amazon CDR and RioCan Real

-0.01

Correlation Coefficient

Amazon CDR  RioCan Real

Good diversification

The 3 months correlation between Amazon and RioCan is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Amazon CDR and RioCan Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RioCan Real Estate 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 RioCan Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RioCan Real Estate has no effect on the direction of Amazon CDR i.e., Amazon CDR and RioCan Real go up and down completely randomly.

Pair Corralation between Amazon CDR and RioCan Real

Assuming the 90 days trading horizon Amazon CDR is expected to under-perform the RioCan Real. In addition to that, Amazon CDR is 1.27 times more volatile than RioCan Real Estate. It trades about -0.09 of its total potential returns per unit of risk. RioCan Real Estate is currently generating about -0.05 per unit of volatility. If you would invest  1,808  in RioCan Real Estate on December 25, 2024 and sell it today you would lose (85.00) from holding RioCan Real Estate or give up 4.7% of portfolio value over 90 days.

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

Amazon CDR  vs.  RioCan Real Estate

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 latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

RioCan Real Estate

Risk-Adjusted Performance

Very Weak

Over the last 90 days RioCan Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward indicators, RioCan Real is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Amazon CDR and RioCan Real

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

The idea behind Amazon CDR and RioCan Real Estate 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 Transaction History module to view history of all your transactions and understand their impact on performance.