Correlation Between Nemak S and Amazon

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

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

Diversification Opportunities for Nemak S and Amazon

0.42

Correlation Coefficient

Nemak S  Amazon

Very weak diversification

The 3 months correlation between Nemak and Amazon is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Nemak S A and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc and Nemak S 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 Nemak S A are associated (or correlated) with Amazon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amazon Inc has no effect on the direction of Nemak S i.e., Nemak S and Amazon go up and down completely randomly.

Pair Corralation between Nemak S and Amazon

Assuming the 90 days trading horizon Nemak S A is expected to generate 3.71 times more return on investment than Amazon. However, Nemak S is 3.71 times more volatile than Amazon Inc. It trades about 0.13 of its potential returns per unit of risk. Amazon Inc is currently generating about 0.11 per unit of risk. If you would invest  202.00  in Nemak S A on October 6, 2024 and sell it today you would earn a total of  24.00  from holding Nemak S A or generate 11.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.0%
Values	Daily Returns

Nemak S A  vs.  Amazon Inc

Nemak S A

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nemak S A are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, Nemak S sustained solid returns over the last few months and may actually be approaching a breakup point.

Amazon Inc

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Amazon showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nemak S and Amazon

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

The idea behind Nemak S A and Amazon Inc 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..