Correlation Between Amazon and Mirasol Resources

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

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

Diversification Opportunities for Amazon and Mirasol Resources

-0.19

Correlation Coefficient

Amazon  Mirasol Resources

Good diversification

The 3 months correlation between Amazon and Mirasol is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Mirasol Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mirasol Resources 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 Mirasol Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mirasol Resources has no effect on the direction of Amazon i.e., Amazon and Mirasol Resources go up and down completely randomly.

Pair Corralation between Amazon and Mirasol Resources

Given the investment horizon of 90 days Amazon is expected to generate 2.6 times less return on investment than Mirasol Resources. But when comparing it to its historical volatility, Amazon Inc is 1.78 times less risky than Mirasol Resources. It trades about 0.26 of its potential returns per unit of risk. Mirasol Resources is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest  42.00  in Mirasol Resources on September 10, 2024 and sell it today you would earn a total of  12.00  from holding Mirasol Resources or generate 28.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Amazon Inc  vs.  Mirasol Resources

Amazon Inc

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 17 (%) 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.

Mirasol Resources

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mirasol Resources are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Mirasol Resources may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Amazon and Mirasol Resources

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

The idea behind Amazon Inc and Mirasol Resources 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.