Correlation Between Amazon CDR and Cymbria

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

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

Diversification Opportunities for Amazon CDR and Cymbria

0.61

Correlation Coefficient

Amazon CDR  Cymbria

Poor diversification

The 3 months correlation between Amazon and Cymbria is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Amazon CDR and Cymbria in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cymbria 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 Cymbria. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cymbria has no effect on the direction of Amazon CDR i.e., Amazon CDR and Cymbria go up and down completely randomly.

Pair Corralation between Amazon CDR and Cymbria

Assuming the 90 days trading horizon Amazon CDR is expected to generate 1.79 times more return on investment than Cymbria. However, Amazon CDR is 1.79 times more volatile than Cymbria. It trades about 0.31 of its potential returns per unit of risk. Cymbria is currently generating about -0.17 per unit of risk. If you would invest  2,401  in Amazon CDR on September 25, 2024 and sell it today you would earn a total of  277.00  from holding Amazon CDR or generate 11.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Amazon CDR  vs.  Cymbria

Amazon CDR

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon CDR are ranked lower than 12 (%) 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.

Cymbria

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cymbria has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental drivers, Cymbria 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 Cymbria

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

The idea behind Amazon CDR and Cymbria 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.