Correlation Between Amazon and American Copper

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

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

Diversification Opportunities for Amazon and American Copper

-0.27

Correlation Coefficient

Amazon  American Copper

Very good diversification

The 3 months correlation between Amazon and American is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and American Copper Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Copper Deve 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 American Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Copper Deve has no effect on the direction of Amazon i.e., Amazon and American Copper go up and down completely randomly.

Pair Corralation between Amazon and American Copper

Given the investment horizon of 90 days Amazon Inc is expected to under-perform the American Copper. But the stock apears to be less risky and, when comparing its historical volatility, Amazon Inc is 75.91 times less risky than American Copper. The stock trades about -0.09 of its potential returns per unit of risk. The American Copper Development is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  14.00  in American Copper Development on December 27, 2024 and sell it today you would lose (4.00) from holding American Copper Development or give up 28.57% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Amazon Inc  vs.  American Copper Development

Amazon Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Amazon Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

American Copper Deve

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Copper Development are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, American Copper reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amazon and American Copper

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

The idea behind Amazon Inc and American Copper Development 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 CEOs Directory module to screen CEOs from public companies around the world.