Correlation Between Amazon and Kiplin Metals

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

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

Diversification Opportunities for Amazon and Kiplin Metals

-0.25

Correlation Coefficient

Amazon  Kiplin Metals

Very good diversification

The 3 months correlation between Amazon and Kiplin is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Kiplin Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kiplin Metals 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 Kiplin Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kiplin Metals has no effect on the direction of Amazon i.e., Amazon and Kiplin Metals go up and down completely randomly.

Pair Corralation between Amazon and Kiplin Metals

Given the investment horizon of 90 days Amazon is expected to generate 1.15 times less return on investment than Kiplin Metals. But when comparing it to its historical volatility, Amazon Inc is 4.58 times less risky than Kiplin Metals. It trades about 0.15 of its potential returns per unit of risk. Kiplin Metals is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  27.00  in Kiplin Metals on September 3, 2024 and sell it today you would earn a total of  0.00  from holding Kiplin Metals or generate 0.0% 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.  Kiplin Metals

Amazon Inc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 11 (%) 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.

Kiplin Metals

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kiplin Metals are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Kiplin Metals showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amazon and Kiplin Metals

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

The idea behind Amazon Inc and Kiplin Metals 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.