Correlation Between Amazon and Cardano

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

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

Diversification Opportunities for Amazon and Cardano

0.39

Correlation Coefficient

Amazon  Cardano

Weak diversification

The 3 months correlation between Amazon and Cardano is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Cardano in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardano 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 Cardano. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cardano has no effect on the direction of Amazon i.e., Amazon and Cardano go up and down completely randomly.

Pair Corralation between Amazon and Cardano

Given the investment horizon of 90 days Amazon Inc is expected to generate 0.23 times more return on investment than Cardano. However, Amazon Inc is 4.3 times less risky than Cardano. It trades about -0.07 of its potential returns per unit of risk. Cardano is currently generating about -0.25 per unit of risk. If you would invest  17,815  in Amazon Inc on January 20, 2024 and sell it today you would lose (352.00) from holding Amazon Inc or give up 1.98% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

Amazon Inc  vs.  Cardano

Amazon Inc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Amazon displayed solid returns over the last few months and may actually be approaching a breakup point.

Cardano

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cardano has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Cardano is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Amazon and Cardano

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

The idea behind Amazon Inc and Cardano 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.

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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.