Correlation Between Amazon CDR and Converge Technology

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

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

Diversification Opportunities for Amazon CDR and Converge Technology

-0.67

Correlation Coefficient

Amazon CDR  Converge Technology

Excellent diversification

The 3 months correlation between Amazon and Converge is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Amazon CDR and Converge Technology Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Converge Technology 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 Converge Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Converge Technology has no effect on the direction of Amazon CDR i.e., Amazon CDR and Converge Technology go up and down completely randomly.

Pair Corralation between Amazon CDR and Converge Technology

Assuming the 90 days trading horizon Amazon CDR is expected to generate 0.44 times more return on investment than Converge Technology. However, Amazon CDR is 2.26 times less risky than Converge Technology. It trades about 0.15 of its potential returns per unit of risk. Converge Technology Solutions is currently generating about -0.09 per unit of risk. If you would invest  2,105  in Amazon CDR on August 31, 2024 and sell it today you would earn a total of  365.00  from holding Amazon CDR or generate 17.34% return on investment over 90 days.

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

Amazon CDR  vs.  Converge Technology Solutions

Amazon CDR

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon CDR are ranked lower than 11 (%) 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.

Converge Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Converge Technology Solutions 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 very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Amazon CDR and Converge Technology

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

The idea behind Amazon CDR and Converge Technology 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.

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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..