Correlation Between Amazon and Melcor Developments

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

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

Diversification Opportunities for Amazon and Melcor Developments

0.65

Correlation Coefficient

Amazon  Melcor Developments

Poor diversification

The 3 months correlation between Amazon and Melcor is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Melcor Developments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Melcor Developments 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 Melcor Developments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Melcor Developments has no effect on the direction of Amazon i.e., Amazon and Melcor Developments go up and down completely randomly.

Pair Corralation between Amazon and Melcor Developments

Given the investment horizon of 90 days Amazon Inc is expected to under-perform the Melcor Developments. In addition to that, Amazon is 1.35 times more volatile than Melcor Developments. It trades about -0.12 of its total potential returns per unit of risk. Melcor Developments is currently generating about -0.01 per unit of volatility. If you would invest  1,268  in Melcor Developments on December 29, 2024 and sell it today you would lose (22.00) from holding Melcor Developments or give up 1.74% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.83%
Values	Daily Returns

Amazon Inc  vs.  Melcor Developments

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.

Melcor Developments

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Amazon and Melcor Developments

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

The idea behind Amazon Inc and Melcor Developments 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.