Correlation Between Amazon and VF Corp

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

By analyzing existing cross correlation between Amazon Inc and VF Corp, you can compare the effects of market volatilities on Amazon and VF Corp 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 VF Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and VF Corp.

Diversification Opportunities for Amazon and VF Corp

0.61

Correlation Coefficient

Amazon  VF Corp

Poor diversification

The 3 months correlation between Amazon and 0R30 is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and VF Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VF Corp 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 VF Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VF Corp has no effect on the direction of Amazon i.e., Amazon and VF Corp go up and down completely randomly.

Pair Corralation between Amazon and VF Corp

Assuming the 90 days trading horizon Amazon Inc is expected to generate 0.71 times more return on investment than VF Corp. However, Amazon Inc is 1.42 times less risky than VF Corp. It trades about 0.4 of its potential returns per unit of risk. VF Corp is currently generating about 0.2 per unit of risk. If you would invest  20,000  in Amazon Inc on September 24, 2024 and sell it today you would earn a total of  2,550  from holding Amazon Inc or generate 12.75% return on investment over 90 days.

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

Amazon Inc  vs.  VF Corp

Amazon Inc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Amazon unveiled solid returns over the last few months and may actually be approaching a breakup point.

VF Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in VF Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, VF Corp unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amazon and VF Corp

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

The idea behind Amazon Inc and VF Corp 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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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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.