Correlation Between Amazon CDR and Focus Graphite

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

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

Diversification Opportunities for Amazon CDR and Focus Graphite

-0.41

Correlation Coefficient

Amazon CDR  Focus Graphite

Very good diversification

The 3 months correlation between Amazon and Focus is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Amazon CDR and Focus Graphite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Focus Graphite and Amazon CDR 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 CDR are associated (or correlated) with Focus Graphite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Focus Graphite has no effect on the direction of Amazon CDR i.e., Amazon CDR and Focus Graphite go up and down completely randomly.

Pair Corralation between Amazon CDR and Focus Graphite

Assuming the 90 days trading horizon Amazon CDR is expected to generate 0.22 times more return on investment than Focus Graphite. However, Amazon CDR is 4.53 times less risky than Focus Graphite. It trades about 0.04 of its potential returns per unit of risk. Focus Graphite is currently generating about -0.05 per unit of risk. If you would invest  2,143  in Amazon CDR on March 20, 2024 and sell it today you would earn a total of  60.00  from holding Amazon CDR or generate 2.8% return on investment over 90 days.

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

Amazon CDR  vs.  Focus Graphite

Amazon CDR

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon CDR are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Amazon CDR is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Focus Graphite

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Focus Graphite 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 basic indicators remain fairly stable which may send shares a bit higher in July 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Amazon CDR and Focus Graphite

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

The idea behind Amazon CDR and Focus Graphite 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.