Correlation Between Amazon and Industrias

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

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

Diversification Opportunities for Amazon and Industrias

-0.69

Correlation Coefficient

Amazon  Industrias

Excellent diversification

The 3 months correlation between Amazon and Industrias is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Industrias CH S in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrias CH S 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 Industrias. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrias CH S has no effect on the direction of Amazon i.e., Amazon and Industrias go up and down completely randomly.

Pair Corralation between Amazon and Industrias

Assuming the 90 days trading horizon Amazon Inc is expected to generate 1.66 times more return on investment than Industrias. However, Amazon is 1.66 times more volatile than Industrias CH S. It trades about 0.29 of its potential returns per unit of risk. Industrias CH S is currently generating about -0.12 per unit of risk. If you would invest  424,243  in Amazon Inc on September 28, 2024 and sell it today you would earn a total of  36,557  from holding Amazon Inc or generate 8.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Amazon Inc  vs.  Industrias CH S

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

Industrias CH S

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Industrias CH S has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Industrias is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Amazon and Industrias

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

The idea behind Amazon Inc and Industrias CH S 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.