Correlation Between Amazon and Taichung Commercial

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

By analyzing existing cross correlation between Amazon Inc and Taichung Commercial Bank, you can compare the effects of market volatilities on Amazon and Taichung Commercial 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 Taichung Commercial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Taichung Commercial.

Diversification Opportunities for Amazon and Taichung Commercial

0.35

Correlation Coefficient

Amazon  Taichung Commercial

Weak diversification

The 3 months correlation between Amazon and Taichung is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Taichung Commercial Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taichung Commercial Bank 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 Taichung Commercial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taichung Commercial Bank has no effect on the direction of Amazon i.e., Amazon and Taichung Commercial go up and down completely randomly.

Pair Corralation between Amazon and Taichung Commercial

Given the investment horizon of 90 days Amazon is expected to generate 1.4 times less return on investment than Taichung Commercial. In addition to that, Amazon is 2.15 times more volatile than Taichung Commercial Bank. It trades about 0.02 of its total potential returns per unit of risk. Taichung Commercial Bank is currently generating about 0.05 per unit of volatility. If you would invest  1,865  in Taichung Commercial Bank on December 2, 2024 and sell it today you would earn a total of  35.00  from holding Taichung Commercial Bank or generate 1.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	93.44%
Values	Daily Returns

Amazon Inc  vs.  Taichung Commercial Bank

Amazon Inc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Amazon is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Taichung Commercial Bank

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Taichung Commercial Bank are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Taichung Commercial is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Amazon and Taichung Commercial

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

The idea behind Amazon Inc and Taichung Commercial Bank 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.