Correlation Between Amazon CDR and Badger Infrastructure

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

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

Diversification Opportunities for Amazon CDR and Badger Infrastructure

-0.41

Correlation Coefficient

Amazon CDR  Badger Infrastructure

Very good diversification

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

Pair Corralation between Amazon CDR and Badger Infrastructure

Assuming the 90 days trading horizon Amazon CDR is expected to generate 0.83 times more return on investment than Badger Infrastructure. However, Amazon CDR is 1.2 times less risky than Badger Infrastructure. It trades about 0.13 of its potential returns per unit of risk. Badger Infrastructure Solutions is currently generating about -0.03 per unit of risk. If you would invest  2,316  in Amazon CDR on September 21, 2024 and sell it today you would earn a total of  359.00  from holding Amazon CDR or generate 15.5% 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.  Badger Infrastructure Solution

Amazon CDR

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon CDR are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Amazon CDR exhibited solid returns over the last few months and may actually be approaching a breakup point.

Badger Infrastructure

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Badger Infrastructure Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Badger Infrastructure is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Amazon CDR and Badger Infrastructure

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

The idea behind Amazon CDR and Badger Infrastructure Solutions 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.