Correlation Between Amazon and Xinjiang Zhongtai

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

By analyzing existing cross correlation between Amazon Inc and Xinjiang Zhongtai Chemical, you can compare the effects of market volatilities on Amazon and Xinjiang Zhongtai 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 with a short position of Xinjiang Zhongtai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Xinjiang Zhongtai.

Diversification Opportunities for Amazon and Xinjiang Zhongtai

0.77

Correlation Coefficient

Amazon  Xinjiang Zhongtai

Poor diversification

The 3 months correlation between Amazon and Xinjiang is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Xinjiang Zhongtai Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xinjiang Zhongtai and Amazon 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 Inc are associated (or correlated) with Xinjiang Zhongtai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xinjiang Zhongtai has no effect on the direction of Amazon i.e., Amazon and Xinjiang Zhongtai go up and down completely randomly.

Pair Corralation between Amazon and Xinjiang Zhongtai

Given the investment horizon of 90 days Amazon is expected to generate 1.76 times less return on investment than Xinjiang Zhongtai. But when comparing it to its historical volatility, Amazon Inc is 1.16 times less risky than Xinjiang Zhongtai. It trades about 0.17 of its potential returns per unit of risk. Xinjiang Zhongtai Chemical is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  347.00  in Xinjiang Zhongtai Chemical on September 5, 2024 and sell it today you would earn a total of  121.00  from holding Xinjiang Zhongtai Chemical or generate 34.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	92.06%
Values	Daily Returns

Amazon Inc  vs.  Xinjiang Zhongtai Chemical

Amazon Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Amazon displayed solid returns over the last few months and may actually be approaching a breakup point.

Xinjiang Zhongtai

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Xinjiang Zhongtai Chemical are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xinjiang Zhongtai sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amazon and Xinjiang Zhongtai

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

The idea behind Amazon Inc and Xinjiang Zhongtai Chemical 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.