Correlation Between Amazon and Fibra Plus

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

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

Diversification Opportunities for Amazon and Fibra Plus

0.1

Correlation Coefficient

Amazon  Fibra Plus

Average diversification

The 3 months correlation between Amazon and Fibra is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Fibra Plus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fibra Plus 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 Fibra Plus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fibra Plus has no effect on the direction of Amazon i.e., Amazon and Fibra Plus go up and down completely randomly.

Pair Corralation between Amazon and Fibra Plus

Assuming the 90 days trading horizon Amazon Inc is expected to under-perform the Fibra Plus. But the stock apears to be less risky and, when comparing its historical volatility, Amazon Inc is 3.82 times less risky than Fibra Plus. The stock trades about -0.04 of its potential returns per unit of risk. The Fibra Plus is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  529.00  in Fibra Plus on October 10, 2024 and sell it today you would earn a total of  141.00  from holding Fibra Plus or generate 26.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Amazon Inc  vs.  Fibra Plus

Amazon Inc

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Amazon showed solid returns over the last few months and may actually be approaching a breakup point.

Fibra Plus

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fibra Plus are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fibra Plus may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Amazon and Fibra Plus

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

The idea behind Amazon Inc and Fibra Plus 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.