Correlation Between Highwood Asset and Amazon CDR

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

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

Diversification Opportunities for Highwood Asset and Amazon CDR

0.45

Correlation Coefficient

Highwood Asset  Amazon CDR

Very weak diversification

The 3 months correlation between Highwood and Amazon is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Highwood Asset Management and Amazon CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon CDR and Highwood Asset 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 Highwood Asset Management 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 Highwood Asset i.e., Highwood Asset and Amazon CDR go up and down completely randomly.

Pair Corralation between Highwood Asset and Amazon CDR

Assuming the 90 days horizon Highwood Asset Management is expected to generate 1.35 times more return on investment than Amazon CDR. However, Highwood Asset is 1.35 times more volatile than Amazon CDR. It trades about 0.01 of its potential returns per unit of risk. Amazon CDR is currently generating about -0.15 per unit of risk. If you would invest  616.00  in Highwood Asset Management on December 24, 2024 and sell it today you would lose (2.00) from holding Highwood Asset Management or give up 0.32% of portfolio value over 90 days.

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

Highwood Asset Management  vs.  Amazon CDR

Highwood Asset Management

Risk-Adjusted Performance

Very Weak

Over the last 90 days Highwood Asset Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Highwood Asset is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Amazon CDR

Risk-Adjusted Performance

Very Weak

Over the last 90 days Amazon CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Highwood Asset and Amazon CDR

The main advantage of trading using opposite Highwood Asset and Amazon CDR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Highwood Asset 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 Highwood Asset Management 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 Global Correlations module to find global opportunities by holding instruments from different markets.