Correlation Between Amazon CDR and Gatos Silver

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

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

Diversification Opportunities for Amazon CDR and Gatos Silver

-0.34

Correlation Coefficient

Amazon CDR  Gatos Silver

Very good diversification

The 3 months correlation between Amazon and Gatos is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Amazon CDR and Gatos Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gatos Silver 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 Gatos Silver. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gatos Silver has no effect on the direction of Amazon CDR i.e., Amazon CDR and Gatos Silver go up and down completely randomly.

Pair Corralation between Amazon CDR and Gatos Silver

Assuming the 90 days trading horizon Amazon CDR is expected to generate 0.48 times more return on investment than Gatos Silver. However, Amazon CDR is 2.1 times less risky than Gatos Silver. It trades about 0.15 of its potential returns per unit of risk. Gatos Silver is currently generating about -0.01 per unit of risk. If you would invest  2,298  in Amazon CDR on September 25, 2024 and sell it today you would earn a total of  425.00  from holding Amazon CDR or generate 18.49% return on investment over 90 days.

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

Amazon CDR  vs.  Gatos Silver

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.

Gatos Silver

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gatos Silver has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Gatos Silver 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 Gatos Silver

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

The idea behind Amazon CDR and Gatos Silver 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.