Correlation Between Amazon and ClearSign Combustion

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

Diversification Opportunities for Amazon and ClearSign Combustion

0.81
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Amazon and ClearSign is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and ClearSign Combustion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ClearSign Combustion 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 ClearSign Combustion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ClearSign Combustion has no effect on the direction of Amazon i.e., Amazon and ClearSign Combustion go up and down completely randomly.

Pair Corralation between Amazon and ClearSign Combustion

Given the investment horizon of 90 days Amazon Inc is expected to generate 0.44 times more return on investment than ClearSign Combustion. However, Amazon Inc is 2.26 times less risky than ClearSign Combustion. It trades about -0.03 of its potential returns per unit of risk. ClearSign Combustion is currently generating about -0.03 per unit of risk. If you would invest  16,205  in Amazon Inc on September 7, 2022 and sell it today you would lose (7,104)  from holding Amazon Inc or give up 43.84% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Amazon Inc  vs.  ClearSign Combustion

 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 unsteady 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

ClearSign Combustion 
ClearSign Performance
0 of 100
Over the last 90 days ClearSign Combustion has generated negative risk-adjusted returns adding no value to investors with long positions. Even with inconsistent performance in the last few months, the Stock's forward indicators remain relatively invariable which may send shares a bit higher in January 2023. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

ClearSign Price Channel

Amazon and ClearSign Combustion Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Amazon and ClearSign Combustion

The main advantage of trading using opposite Amazon and ClearSign Combustion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, ClearSign Combustion 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 ClearSign Combustion will offset losses from the drop in ClearSign Combustion's long position.
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The idea behind Amazon Inc and ClearSign Combustion 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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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.

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