Correlation Between Amazon and Netcall PLC

Can any of the company-specific risk be diversified away by investing in both Amazon and Netcall 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 Netcall 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 Netcall PLC, you can compare the effects of market volatilities on Amazon and Netcall 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 Netcall PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Netcall PLC.

Diversification Opportunities for Amazon and Netcall PLC

0.76

Correlation Coefficient

Amazon  Netcall PLC

Poor diversification

The 3 months correlation between Amazon and Netcall is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Netcall PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Netcall 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 Netcall PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Netcall PLC has no effect on the direction of Amazon i.e., Amazon and Netcall PLC go up and down completely randomly.

Pair Corralation between Amazon and Netcall PLC

Assuming the 90 days trading horizon Amazon Inc is expected to generate 0.26 times more return on investment than Netcall PLC. However, Amazon Inc is 3.86 times less risky than Netcall PLC. It trades about 0.44 of its potential returns per unit of risk. Netcall PLC is currently generating about 0.04 per unit of risk. If you would invest  18,956  in Amazon Inc on September 23, 2024 and sell it today you would earn a total of  2,629  from holding Amazon Inc or generate 13.87% return on investment over 90 days.

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

Amazon Inc  vs.  Netcall PLC

Amazon Inc

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 17 (%) 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.

Netcall PLC

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Netcall PLC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Netcall PLC unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amazon and Netcall PLC

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

The idea behind Amazon Inc and Netcall 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.