Correlation Between Amazon and Team Internet

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

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

Diversification Opportunities for Amazon and Team Internet

-0.53

Correlation Coefficient

Amazon  Team Internet

Excellent diversification

The 3 months correlation between Amazon and Team is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Team Internet Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Team Internet Group 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 Team Internet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Team Internet Group has no effect on the direction of Amazon i.e., Amazon and Team Internet go up and down completely randomly.

Pair Corralation between Amazon and Team Internet

Assuming the 90 days trading horizon Amazon Inc is expected to under-perform the Team Internet. But the stock apears to be less risky and, when comparing its historical volatility, Amazon Inc is 7.42 times less risky than Team Internet. The stock trades about -0.18 of its potential returns per unit of risk. The Team Internet Group is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  9,100  in Team Internet Group on October 22, 2024 and sell it today you would earn a total of  1,460  from holding Team Internet Group or generate 16.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Amazon Inc  vs.  Team Internet Group

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.

Team Internet Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Team Internet Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Team Internet is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Amazon and Team Internet

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

The idea behind Amazon Inc and Team Internet Group 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.