Correlation Between Amazon and Firan Technology

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

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

Diversification Opportunities for Amazon and Firan Technology

0.78

Correlation Coefficient

Amazon  Firan Technology

Poor diversification

The 3 months correlation between Amazon and Firan is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Firan Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Firan Technology 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 Firan Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Firan Technology has no effect on the direction of Amazon i.e., Amazon and Firan Technology go up and down completely randomly.

Pair Corralation between Amazon and Firan Technology

Assuming the 90 days horizon Amazon Inc is expected to generate 0.75 times more return on investment than Firan Technology. However, Amazon Inc is 1.33 times less risky than Firan Technology. It trades about 0.29 of its potential returns per unit of risk. Firan Technology Group is currently generating about 0.17 per unit of risk. If you would invest  16,600  in Amazon Inc on October 8, 2024 and sell it today you would earn a total of  5,090  from holding Amazon Inc or generate 30.66% 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.  Firan Technology Group

Amazon Inc

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Amazon reported solid returns over the last few months and may actually be approaching a breakup point.

Firan Technology

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Firan Technology Group are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Firan Technology unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amazon and Firan Technology

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

The idea behind Amazon Inc and Firan Technology 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.