Correlation Between Amazon and BANK RAKYAT

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

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

Diversification Opportunities for Amazon and BANK RAKYAT

0.25

Correlation Coefficient

Amazon  BANK RAKYAT

Modest diversification

The 3 months correlation between Amazon and BANK is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and BANK RAKYAT IND in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BANK RAKYAT IND 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 BANK RAKYAT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BANK RAKYAT IND has no effect on the direction of Amazon i.e., Amazon and BANK RAKYAT go up and down completely randomly.

Pair Corralation between Amazon and BANK RAKYAT

Assuming the 90 days trading horizon Amazon Inc is expected to generate 0.83 times more return on investment than BANK RAKYAT. However, Amazon Inc is 1.21 times less risky than BANK RAKYAT. It trades about -0.03 of its potential returns per unit of risk. BANK RAKYAT IND is currently generating about -0.15 per unit of risk. If you would invest  20,205  in Amazon Inc on December 3, 2024 and sell it today you would lose (661.00) from holding Amazon Inc or give up 3.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Amazon Inc  vs.  BANK RAKYAT IND

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. In spite of very healthy basic indicators, Amazon is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

BANK RAKYAT IND

Risk-Adjusted Performance

Very Weak

Over the last 90 days BANK RAKYAT IND has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Amazon and BANK RAKYAT

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

The idea behind Amazon Inc and BANK RAKYAT IND 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.