Correlation Between Amazon and DC Media

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

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

Diversification Opportunities for Amazon and DC Media

0.1

Correlation Coefficient

Amazon  DC Media

Average diversification

The 3 months correlation between Amazon and 263720 is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and DC Media CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DC Media CoLtd 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 DC Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DC Media CoLtd has no effect on the direction of Amazon i.e., Amazon and DC Media go up and down completely randomly.

Pair Corralation between Amazon and DC Media

Given the investment horizon of 90 days Amazon Inc is expected to under-perform the DC Media. But the stock apears to be less risky and, when comparing its historical volatility, Amazon Inc is 1.56 times less risky than DC Media. The stock trades about -0.12 of its potential returns per unit of risk. The DC Media CoLtd is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  2,100,000  in DC Media CoLtd on December 30, 2024 and sell it today you would lose (230,000) from holding DC Media CoLtd or give up 10.95% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.16%
Values	Daily Returns

Amazon Inc  vs.  DC Media CoLtd

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 unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

DC Media CoLtd

Risk-Adjusted Performance

Very Weak

Over the last 90 days DC Media CoLtd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Amazon and DC Media

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

The idea behind Amazon Inc and DC Media CoLtd 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.