Correlation Between Amazon and Cadiz

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Can any of the company-specific risk be diversified away by investing in both Amazon and Cadiz 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 Cadiz into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and Cadiz Inc, you can compare the effects of market volatilities on Amazon and Cadiz 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 Cadiz. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Cadiz.

Diversification Opportunities for Amazon and Cadiz

0.56
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Amazon and Cadiz is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Cadiz Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cadiz Inc 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 Cadiz. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cadiz Inc has no effect on the direction of Amazon i.e., Amazon and Cadiz go up and down completely randomly.

Pair Corralation between Amazon and Cadiz

Given the investment horizon of 90 days Amazon is expected to generate 2.07 times less return on investment than Cadiz. But when comparing it to its historical volatility, Amazon Inc is 1.85 times less risky than Cadiz. It trades about 0.06 of its potential returns per unit of risk. Cadiz Inc is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  200.00  in Cadiz Inc on September 5, 2022 and sell it today you would earn a total of  11.00  from holding Cadiz Inc or generate 5.5% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Amazon Inc  vs.  Cadiz Inc

 Performance (%) 
       Timeline  
Amazon Inc 
Amazon Performance
0 of 100
Over the last 90 days Amazon Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2023. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Amazon Price Channel

Cadiz Inc 
Cadiz Performance
0 of 100
Over the last 90 days Cadiz Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2023. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Cadiz Price Channel

Amazon and Cadiz Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Amazon and Cadiz

The main advantage of trading using opposite Amazon and Cadiz positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Cadiz 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 Cadiz will offset losses from the drop in Cadiz's long position.
Amazon vs. Carvana Co
The idea behind Amazon Inc and Cadiz Inc 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.
Cadiz vs. Aris Water Solutions
Check out your portfolio center. 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.

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