Correlation Between Cineplex and Amazon CDR

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

By analyzing existing cross correlation between Cineplex and Amazon CDR, you can compare the effects of market volatilities on Cineplex and Amazon CDR 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 Cineplex with a short position of Amazon CDR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cineplex and Amazon CDR.

Diversification Opportunities for Cineplex and Amazon CDR

0.86

Correlation Coefficient

Cineplex  Amazon CDR

Very poor diversification

The 3 months correlation between Cineplex and Amazon is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Cineplex and Amazon CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon CDR and Cineplex 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 Cineplex are associated (or correlated) with Amazon CDR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amazon CDR has no effect on the direction of Cineplex i.e., Cineplex and Amazon CDR go up and down completely randomly.

Pair Corralation between Cineplex and Amazon CDR

Assuming the 90 days trading horizon Cineplex is expected to under-perform the Amazon CDR. But the stock apears to be less risky and, when comparing its historical volatility, Cineplex is 1.49 times less risky than Amazon CDR. The stock trades about -0.34 of its potential returns per unit of risk. The Amazon CDR is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  2,774  in Amazon CDR on October 17, 2024 and sell it today you would lose (118.00) from holding Amazon CDR or give up 4.25% of portfolio value over 90 days.

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

Cineplex  vs.  Amazon CDR

Cineplex

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cineplex are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Cineplex may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Amazon CDR

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon CDR are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Amazon CDR exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cineplex and Amazon CDR

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

The idea behind Cineplex and Amazon CDR 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.