Correlation Between Agrometal SAI and Amazon

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

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

Diversification Opportunities for Agrometal SAI and Amazon

0.4

Correlation Coefficient

Agrometal SAI  Amazon

Very weak diversification

The 3 months correlation between Agrometal and Amazon is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Agrometal SAI and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc and Agrometal SAI 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 Agrometal SAI 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 Agrometal SAI i.e., Agrometal SAI and Amazon go up and down completely randomly.

Pair Corralation between Agrometal SAI and Amazon

Assuming the 90 days trading horizon Agrometal SAI is expected to generate 1.61 times more return on investment than Amazon. However, Agrometal SAI is 1.61 times more volatile than Amazon Inc. It trades about 0.16 of its potential returns per unit of risk. Amazon Inc is currently generating about 0.08 per unit of risk. If you would invest  5,560  in Agrometal SAI on September 16, 2024 and sell it today you would earn a total of  1,720  from holding Agrometal SAI or generate 30.94% return on investment over 90 days.

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

Agrometal SAI  vs.  Amazon Inc

Agrometal SAI

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Agrometal SAI are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Agrometal SAI sustained solid returns over the last few months and may actually be approaching a breakup point.

Amazon Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Amazon may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Agrometal SAI and Amazon

The main advantage of trading using opposite Agrometal SAI and Amazon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Agrometal SAI 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 Agrometal SAI 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.