Correlation Between Amazon and Atea ASA

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

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

Diversification Opportunities for Amazon and Atea ASA

0.81

Correlation Coefficient

Amazon  Atea ASA

Very poor diversification

The 3 months correlation between Amazon and Atea is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Atea ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atea ASA 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 Atea ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atea ASA has no effect on the direction of Amazon i.e., Amazon and Atea ASA go up and down completely randomly.

Pair Corralation between Amazon and Atea ASA

Assuming the 90 days trading horizon Amazon is expected to generate 1.75 times less return on investment than Atea ASA. But when comparing it to its historical volatility, Amazon Inc is 3.47 times less risky than Atea ASA. It trades about 0.28 of its potential returns per unit of risk. Atea ASA is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  780.00  in Atea ASA on October 5, 2024 and sell it today you would earn a total of  384.00  from holding Atea ASA or generate 49.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.33%
Values	Daily Returns

Amazon Inc  vs.  Atea ASA

Amazon Inc

Risk-Adjusted Performance

0 of 100

Solid

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 weak basic indicators, Amazon displayed solid returns over the last few months and may actually be approaching a breakup point.

Atea ASA

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Atea ASA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile essential indicators, Atea ASA exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amazon and Atea ASA

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

The idea behind Amazon Inc and Atea ASA 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.