Correlation Between Amazon and Cementos Pacasmayo

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

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

Diversification Opportunities for Amazon and Cementos Pacasmayo

-0.2

Correlation Coefficient

Amazon  Cementos Pacasmayo

Good diversification

The 3 months correlation between Amazon and Cementos is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Cementos Pacasmayo SAA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cementos Pacasmayo SAA 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 Cementos Pacasmayo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cementos Pacasmayo SAA has no effect on the direction of Amazon i.e., Amazon and Cementos Pacasmayo go up and down completely randomly.

Pair Corralation between Amazon and Cementos Pacasmayo

Given the investment horizon of 90 days Amazon Inc is expected to generate 0.65 times more return on investment than Cementos Pacasmayo. However, Amazon Inc is 1.54 times less risky than Cementos Pacasmayo. It trades about 0.12 of its potential returns per unit of risk. Cementos Pacasmayo SAA is currently generating about 0.05 per unit of risk. If you would invest  16,708  in Amazon Inc on February 19, 2024 and sell it today you would earn a total of  1,762  from holding Amazon Inc or generate 10.55% return on investment over 90 days.

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

Amazon Inc  vs.  Cementos Pacasmayo SAA

Amazon Inc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Amazon may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Cementos Pacasmayo SAA

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cementos Pacasmayo SAA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Cementos Pacasmayo may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Amazon and Cementos Pacasmayo

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

The idea behind Amazon Inc and Cementos Pacasmayo SAA 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.