Correlation Between Amazon and Catalyst Dynamic

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

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

Diversification Opportunities for Amazon and Catalyst Dynamic

0.95

Correlation Coefficient

Amazon  Catalyst Dynamic

Almost no diversification

The 3 months correlation between Amazon and Catalyst is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Catalyst Dynamic Alpha in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalyst Dynamic Alpha 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 Catalyst Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalyst Dynamic Alpha has no effect on the direction of Amazon i.e., Amazon and Catalyst Dynamic go up and down completely randomly.

Pair Corralation between Amazon and Catalyst Dynamic

Given the investment horizon of 90 days Amazon Inc is expected to under-perform the Catalyst Dynamic. In addition to that, Amazon is 1.2 times more volatile than Catalyst Dynamic Alpha. It trades about -0.12 of its total potential returns per unit of risk. Catalyst Dynamic Alpha is currently generating about -0.13 per unit of volatility. If you would invest  2,310  in Catalyst Dynamic Alpha on December 29, 2024 and sell it today you would lose (263.00) from holding Catalyst Dynamic Alpha or give up 11.39% of portfolio value over 90 days.

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

Amazon Inc  vs.  Catalyst Dynamic Alpha

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 unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Catalyst Dynamic Alpha

Risk-Adjusted Performance

Very Weak

Over the last 90 days Catalyst Dynamic Alpha has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Amazon and Catalyst Dynamic

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

The idea behind Amazon Inc and Catalyst Dynamic Alpha 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.