Correlation Between Amazon CDR and Secure Energy

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

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

Diversification Opportunities for Amazon CDR and Secure Energy

0.43

Correlation Coefficient

Amazon CDR  Secure Energy

Very weak diversification

The 3 months correlation between Amazon and Secure is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Amazon CDR and Secure Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Secure Energy Services 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 Secure Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Secure Energy Services has no effect on the direction of Amazon CDR i.e., Amazon CDR and Secure Energy go up and down completely randomly.

Pair Corralation between Amazon CDR and Secure Energy

Assuming the 90 days trading horizon Amazon CDR is expected to generate 1.03 times more return on investment than Secure Energy. However, Amazon CDR is 1.03 times more volatile than Secure Energy Services. It trades about 0.15 of its potential returns per unit of risk. Secure Energy Services is currently generating about 0.12 per unit of risk. If you would invest  2,252  in Amazon CDR on October 11, 2024 and sell it today you would earn a total of  389.00  from holding Amazon CDR or generate 17.27% return on investment over 90 days.

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

Amazon CDR  vs.  Secure Energy Services

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 abnormal technical and fundamental indicators, Amazon CDR exhibited solid returns over the last few months and may actually be approaching a breakup point.

Secure Energy Services

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Secure Energy Services are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Secure Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amazon CDR and Secure Energy

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

The idea behind Amazon CDR and Secure Energy Services 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 Commodity Directory module to find actively traded commodities issued by global exchanges.