Correlation Between Amazon CDR and Sendero Resources

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

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

Diversification Opportunities for Amazon CDR and Sendero Resources

-0.54

Correlation Coefficient

Amazon CDR  Sendero Resources

Excellent diversification

The 3 months correlation between Amazon and Sendero is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Amazon CDR and Sendero Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sendero Resources 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 Sendero Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sendero Resources Corp has no effect on the direction of Amazon CDR i.e., Amazon CDR and Sendero Resources go up and down completely randomly.

Pair Corralation between Amazon CDR and Sendero Resources

Assuming the 90 days trading horizon Amazon CDR is expected to generate 1.93 times less return on investment than Sendero Resources. But when comparing it to its historical volatility, Amazon CDR is 8.94 times less risky than Sendero Resources. It trades about 0.41 of its potential returns per unit of risk. Sendero Resources Corp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  19.00  in Sendero Resources Corp on September 19, 2024 and sell it today you would earn a total of  2.00  from holding Sendero Resources Corp or generate 10.53% 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.  Sendero Resources Corp

Amazon CDR

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon CDR are ranked lower than 14 (%) 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.

Sendero Resources Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sendero Resources Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Sendero Resources showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amazon CDR and Sendero Resources

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

The idea behind Amazon CDR and Sendero Resources 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.

Check out your portfolio center.

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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.