Correlation Between Amazon and China Life

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

Diversification Opportunities for Amazon and China Life

0.85
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Amazon and China is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and China Life Insurance Company L in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Life Insurance 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 China Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Life Insurance has no effect on the direction of Amazon i.e., Amazon and China Life go up and down completely randomly.

Pair Corralation between Amazon and China Life

If you would invest (100.00)  in China Life Insurance on August 31, 2022 and sell it today you would earn a total of  100.00  from holding China Life Insurance or generate -100.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy0.0%
ValuesDaily Returns

Amazon Inc  vs.  China Life Insurance Company L

 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 conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in December 2022. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Amazon Price Channel

China Life Insurance 
China Performance
0 of 100
Over the last 90 days China Life Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, China Life is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Amazon and China Life Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Amazon and China Life

The main advantage of trading using opposite Amazon and China Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, China Life 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 China Life will offset losses from the drop in China Life's long position.
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The idea behind Amazon Inc and China Life Insurance 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.

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