Correlation Between Amazon and Linde Plc

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

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

Diversification Opportunities for Amazon and Linde Plc

-0.64

Correlation Coefficient

Amazon  Linde Plc

Excellent diversification

The 3 months correlation between Amazon and Linde is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Linde plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Linde plc 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 Linde Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Linde plc has no effect on the direction of Amazon i.e., Amazon and Linde Plc go up and down completely randomly.

Pair Corralation between Amazon and Linde Plc

Assuming the 90 days trading horizon Amazon Inc is expected to generate 2.7 times more return on investment than Linde Plc. However, Amazon is 2.7 times more volatile than Linde plc. It trades about -0.06 of its potential returns per unit of risk. Linde plc is currently generating about -0.66 per unit of risk. If you would invest  21,710  in Amazon Inc on October 9, 2024 and sell it today you would lose (275.00) from holding Amazon Inc or give up 1.27% of portfolio value over 90 days.

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

Amazon Inc  vs.  Linde plc

Amazon Inc

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Amazon displayed solid returns over the last few months and may actually be approaching a breakup point.

Linde plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Linde plc 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 Linde Plc

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

The idea behind Amazon Inc and Linde plc 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.