Correlation Between Amazon and PI Advanced

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

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

Diversification Opportunities for Amazon and PI Advanced

0.06

Correlation Coefficient

Amazon  PI Advanced

Significant diversification

The 3 months correlation between Amazon and 178920 is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and PI Advanced Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PI Advanced Materials 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 PI Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PI Advanced Materials has no effect on the direction of Amazon i.e., Amazon and PI Advanced go up and down completely randomly.

Pair Corralation between Amazon and PI Advanced

Given the investment horizon of 90 days Amazon Inc is expected to under-perform the PI Advanced. But the stock apears to be less risky and, when comparing its historical volatility, Amazon Inc is 2.59 times less risky than PI Advanced. The stock trades about -0.32 of its potential returns per unit of risk. The PI Advanced Materials is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,750,000  in PI Advanced Materials on December 2, 2024 and sell it today you would earn a total of  72,000  from holding PI Advanced Materials or generate 4.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Amazon Inc  vs.  PI Advanced Materials

Amazon Inc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Amazon is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

PI Advanced Materials

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PI Advanced Materials are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, PI Advanced sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amazon and PI Advanced

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

The idea behind Amazon Inc and PI Advanced Materials 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.