Correlation Between Amazon and Pan Entertainment

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

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

Diversification Opportunities for Amazon and Pan Entertainment

-0.64

Correlation Coefficient

Amazon  Pan Entertainment

Excellent diversification

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

Pair Corralation between Amazon and Pan Entertainment

Given the investment horizon of 90 days Amazon Inc is expected to under-perform the Pan Entertainment. But the stock apears to be less risky and, when comparing its historical volatility, Amazon Inc is 2.88 times less risky than Pan Entertainment. The stock trades about -0.1 of its potential returns per unit of risk. The Pan Entertainment Co is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  214,000  in Pan Entertainment Co on December 26, 2024 and sell it today you would earn a total of  61,500  from holding Pan Entertainment Co or generate 28.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	93.44%
Values	Daily Returns

Amazon Inc  vs.  Pan Entertainment Co

Amazon Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Amazon Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pan Entertainment

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pan Entertainment Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Pan Entertainment sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amazon and Pan Entertainment

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

The idea behind Amazon Inc and Pan Entertainment Co 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.

Check out your portfolio center.

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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.