Correlation Between Amazon CDR and MTY Food

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

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

Diversification Opportunities for Amazon CDR and MTY Food

0.67

Correlation Coefficient

Amazon CDR  MTY Food

Poor diversification

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

Pair Corralation between Amazon CDR and MTY Food

Assuming the 90 days trading horizon Amazon CDR is expected to generate 1.17 times more return on investment than MTY Food. However, Amazon CDR is 1.17 times more volatile than MTY Food Group. It trades about 0.19 of its potential returns per unit of risk. MTY Food Group is currently generating about 0.06 per unit of risk. If you would invest  2,521  in Amazon CDR on September 15, 2024 and sell it today you would earn a total of  188.00  from holding Amazon CDR or generate 7.46% return on investment over 90 days.

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

Amazon CDR  vs.  MTY Food Group

Amazon CDR

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon CDR are ranked lower than 15 (%) 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.

MTY Food Group

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MTY Food Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, MTY Food displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amazon CDR and MTY Food

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

The idea behind Amazon CDR and MTY Food Group 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.