Correlation Between Amazon and Globe Trade

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

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

Diversification Opportunities for Amazon and Globe Trade

-0.12

Correlation Coefficient

Amazon  Globe Trade

Good diversification

The 3 months correlation between Amazon and Globe is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Globe Trade Centre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globe Trade Centre 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 Globe Trade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globe Trade Centre has no effect on the direction of Amazon i.e., Amazon and Globe Trade go up and down completely randomly.

Pair Corralation between Amazon and Globe Trade

Assuming the 90 days trading horizon Amazon Inc is expected to under-perform the Globe Trade. In addition to that, Amazon is 2.14 times more volatile than Globe Trade Centre. It trades about -0.1 of its total potential returns per unit of risk. Globe Trade Centre is currently generating about -0.07 per unit of volatility. If you would invest  93.00  in Globe Trade Centre on December 2, 2024 and sell it today you would lose (2.00) from holding Globe Trade Centre or give up 2.15% of portfolio value over 90 days.

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

Amazon Inc  vs.  Globe Trade Centre

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 current stock price disarray, may contribute to short-term losses for the investors.

Globe Trade Centre

Risk-Adjusted Performance

Very Weak

Over the last 90 days Globe Trade Centre has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Amazon and Globe Trade

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

The idea behind Amazon Inc and Globe Trade Centre 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.