Correlation Between Amazon CDR and Westshore Terminals

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

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

Diversification Opportunities for Amazon CDR and Westshore Terminals

-0.48

Correlation Coefficient

Amazon CDR  Westshore Terminals

Very good diversification

The 3 months correlation between Amazon and Westshore is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Amazon CDR and Westshore Terminals Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westshore Terminals 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 Westshore Terminals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westshore Terminals has no effect on the direction of Amazon CDR i.e., Amazon CDR and Westshore Terminals go up and down completely randomly.

Pair Corralation between Amazon CDR and Westshore Terminals

Assuming the 90 days trading horizon Amazon CDR is expected to generate 1.82 times more return on investment than Westshore Terminals. However, Amazon CDR is 1.82 times more volatile than Westshore Terminals Investment. It trades about 0.25 of its potential returns per unit of risk. Westshore Terminals Investment is currently generating about -0.17 per unit of risk. If you would invest  2,417  in Amazon CDR on September 21, 2024 and sell it today you would earn a total of  258.00  from holding Amazon CDR or generate 10.67% 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.  Westshore Terminals Investment

Amazon CDR

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon CDR are ranked lower than 10 (%) 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.

Westshore Terminals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Westshore Terminals Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Westshore Terminals is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Amazon CDR and Westshore Terminals

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

The idea behind Amazon CDR and Westshore Terminals Investment 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.