Correlation Between Amazon CDR and Pinetree Capital

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

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

Diversification Opportunities for Amazon CDR and Pinetree Capital

0.73

Correlation Coefficient

Amazon CDR  Pinetree Capital

Poor diversification

The 3 months correlation between Amazon and Pinetree is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Amazon CDR and Pinetree Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pinetree Capital 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 Pinetree Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pinetree Capital has no effect on the direction of Amazon CDR i.e., Amazon CDR and Pinetree Capital go up and down completely randomly.

Pair Corralation between Amazon CDR and Pinetree Capital

Assuming the 90 days trading horizon Amazon CDR is expected to generate 3.06 times less return on investment than Pinetree Capital. But when comparing it to its historical volatility, Amazon CDR is 1.95 times less risky than Pinetree Capital. It trades about 0.22 of its potential returns per unit of risk. Pinetree Capital is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest  701.00  in Pinetree Capital on September 7, 2024 and sell it today you would earn a total of  670.00  from holding Pinetree Capital or generate 95.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Amazon CDR  vs.  Pinetree Capital

Amazon CDR

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon CDR are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal technical and fundamental indicators, Amazon CDR exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pinetree Capital

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Pinetree Capital are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Pinetree Capital displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amazon CDR and Pinetree Capital

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

The idea behind Amazon CDR and Pinetree Capital 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.