Correlation Between Amazon and Cyclo Therapeutics

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

By analyzing existing cross correlation between Amazon Inc and Cyclo Therapeutics, you can compare the effects of market volatilities on Amazon and Cyclo Therapeutics 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 with a short position of Cyclo Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Cyclo Therapeutics.

Diversification Opportunities for Amazon and Cyclo Therapeutics

-0.19

Correlation Coefficient

Amazon  Cyclo Therapeutics

Good diversification

The 3 months correlation between Amazon and Cyclo is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Cyclo Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cyclo Therapeutics and Amazon 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 Inc are associated (or correlated) with Cyclo Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cyclo Therapeutics has no effect on the direction of Amazon i.e., Amazon and Cyclo Therapeutics go up and down completely randomly.

Pair Corralation between Amazon and Cyclo Therapeutics

Given the investment horizon of 90 days Amazon Inc is expected to generate 0.31 times more return on investment than Cyclo Therapeutics. However, Amazon Inc is 3.26 times less risky than Cyclo Therapeutics. It trades about 0.1 of its potential returns per unit of risk. Cyclo Therapeutics is currently generating about 0.0 per unit of risk. If you would invest  9,158  in Amazon Inc on September 4, 2024 and sell it today you would earn a total of  12,186  from holding Amazon Inc or generate 133.06% return on investment over 90 days.

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

Amazon Inc  vs.  Cyclo Therapeutics

Amazon Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Amazon displayed solid returns over the last few months and may actually be approaching a breakup point.

Cyclo Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cyclo Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Cyclo Therapeutics is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Amazon and Cyclo Therapeutics

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

The idea behind Amazon Inc and Cyclo Therapeutics 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.