Correlation Between Red Moon and Amazon

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

Diversification Opportunities for Red Moon and Amazon

0.74
  Correlation Coefficient

Poor diversification

The 3 months correlation between REMRF and Amazon is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Red Moon Resources and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc and Red Moon 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 Red Moon Resources are associated (or correlated) with Amazon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amazon Inc has no effect on the direction of Red Moon i.e., Red Moon and Amazon go up and down completely randomly.

Pair Corralation between Red Moon and Amazon

Assuming the 90 days horizon Red Moon Resources is expected to under-perform the Amazon. In addition to that, Red Moon is 2.59 times more volatile than Amazon Inc. It trades about -0.09 of its total potential returns per unit of risk. Amazon Inc is currently generating about -0.13 per unit of volatility. If you would invest  12,611  in Amazon Inc on September 5, 2022 and sell it today you would lose (3,198)  from holding Amazon Inc or give up 25.36% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy98.46%
ValuesDaily Returns

Red Moon Resources  vs.  Amazon Inc

 Performance (%) 
       Timeline  
Red Moon Resources 
REMRF Performance
0 of 100
Over the last 90 days Red Moon Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2023. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

REMRF Price Channel

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

Red Moon and Amazon Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Red Moon and Amazon

The main advantage of trading using opposite Red Moon and Amazon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Red Moon position performs unexpectedly, Amazon 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 Amazon will offset losses from the drop in Amazon's long position.
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The idea behind Red Moon Resources and Amazon 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.
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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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.

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