Correlation Between Amazon CDR and Imperial Oil

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

By analyzing existing cross correlation between Amazon CDR and Imperial Oil, you can compare the effects of market volatilities on Amazon CDR and Imperial Oil 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 CDR with a short position of Imperial Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon CDR and Imperial Oil.

Diversification Opportunities for Amazon CDR and Imperial Oil

0.69

Correlation Coefficient

Amazon CDR  Imperial Oil

Poor diversification

The 3 months correlation between Amazon and Imperial is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Amazon CDR and Imperial Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Imperial Oil and Amazon CDR 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 CDR are associated (or correlated) with Imperial Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Imperial Oil has no effect on the direction of Amazon CDR i.e., Amazon CDR and Imperial Oil go up and down completely randomly.

Pair Corralation between Amazon CDR and Imperial Oil

Assuming the 90 days trading horizon Amazon CDR is expected to generate 1.23 times more return on investment than Imperial Oil. However, Amazon CDR is 1.23 times more volatile than Imperial Oil. It trades about 0.23 of its potential returns per unit of risk. Imperial Oil is currently generating about 0.24 per unit of risk. If you would invest  2,136  in Amazon CDR on April 23, 2025 and sell it today you would earn a total of  556.00  from holding Amazon CDR or generate 26.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Amazon CDR  vs.  Imperial Oil

Amazon CDR

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon CDR are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Amazon CDR displayed solid returns over the last few months and may actually be approaching a breakup point.

Imperial Oil

Risk-Adjusted Performance

Solid

Over the last 90 days Imperial Oil has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very weak basic indicators, Imperial Oil displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amazon CDR and Imperial Oil

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

The idea behind Amazon CDR and Imperial Oil 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.

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 the Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.