Correlation Between Amazon and Resolute Mining
Can any of the company-specific risk be diversified away by investing in both Amazon and Resolute Mining 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 Resolute Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and Resolute Mining Ltd, you can compare the effects of market volatilities on Amazon and Resolute Mining 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 Resolute Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Resolute Mining.
Diversification Opportunities for Amazon and Resolute Mining
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Amazon and Resolute is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Resolute Mining Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Resolute Mining 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 Resolute Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Resolute Mining has no effect on the direction of Amazon i.e., Amazon and Resolute Mining go up and down completely randomly.
Pair Corralation between Amazon and Resolute Mining
Given the investment horizon of 90 days Amazon is expected to generate 1.68 times less return on investment than Resolute Mining. But when comparing it to its historical volatility, Amazon Inc is 2.0 times less risky than Resolute Mining. It trades about 0.12 of its potential returns per unit of risk. Resolute Mining Ltd is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 245.00 in Resolute Mining Ltd on February 13, 2024 and sell it today you would earn a total of 43.00 from holding Resolute Mining Ltd or generate 17.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Amazon Inc vs. Resolute Mining Ltd
Performance |
| Timeline |
| Amazon Inc |
| Resolute Mining |
Amazon and Resolute Mining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and Resolute Mining
The main advantage of trading using opposite Amazon and Resolute Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Resolute Mining 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 Resolute Mining will offset losses from the drop in Resolute Mining's long position.The idea behind Amazon Inc and Resolute Mining Ltd 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.| Resolute Mining vs. Westrock Coffee | Resolute Mining vs. Algoma Steel Group | Resolute Mining vs. Nuvve Holding Corp | Resolute Mining vs. SCOR PK |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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