Correlation Between Amazon and AIRBNB INC

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

By analyzing existing cross correlation between Amazon Inc and AIRBNB INC DL 01, you can compare the effects of market volatilities on Amazon and AIRBNB INC 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 AIRBNB INC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and AIRBNB INC.

Diversification Opportunities for Amazon and AIRBNB INC

0.44

Correlation Coefficient

Amazon  AIRBNB INC

Very weak diversification

The 3 months correlation between Amazon and AIRBNB is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and AIRBNB INC DL 01 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIRBNB INC DL 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 AIRBNB INC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AIRBNB INC DL has no effect on the direction of Amazon i.e., Amazon and AIRBNB INC go up and down completely randomly.

Pair Corralation between Amazon and AIRBNB INC

Assuming the 90 days horizon Amazon Inc is expected to under-perform the AIRBNB INC. But the stock apears to be less risky and, when comparing its historical volatility, Amazon Inc is 1.84 times less risky than AIRBNB INC. The stock trades about -0.11 of its potential returns per unit of risk. The AIRBNB INC DL 01 is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  12,572  in AIRBNB INC DL 01 on December 29, 2024 and sell it today you would lose (892.00) from holding AIRBNB INC DL 01 or give up 7.1% of portfolio value over 90 days.

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

Amazon Inc  vs.  AIRBNB INC DL 01

Amazon Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Amazon Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

AIRBNB INC DL

Risk-Adjusted Performance

Very Weak

Over the last 90 days AIRBNB INC DL 01 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, AIRBNB INC is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Amazon and AIRBNB INC

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

The idea behind Amazon Inc and AIRBNB INC DL 01 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.