Correlation Between Amazon and Absci Corp

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

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

Diversification Opportunities for Amazon and Absci Corp

0.43

Correlation Coefficient

Amazon  Absci Corp

Very weak diversification

The 3 months correlation between Amazon and Absci is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Absci Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absci Corp 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 Absci Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Absci Corp has no effect on the direction of Amazon i.e., Amazon and Absci Corp go up and down completely randomly.

Pair Corralation between Amazon and Absci Corp

Given the investment horizon of 90 days Amazon is expected to generate 26.02 times less return on investment than Absci Corp. But when comparing it to its historical volatility, Amazon Inc is 5.14 times less risky than Absci Corp. It trades about 0.02 of its potential returns per unit of risk. Absci Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  315.00  in Absci Corp on December 2, 2024 and sell it today you would earn a total of  70.00  from holding Absci Corp or generate 22.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Amazon Inc  vs.  Absci Corp

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.

Absci Corp

Risk-Adjusted Performance

Modest

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

Pair Trading with Amazon and Absci Corp

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

The idea behind Amazon Inc and Absci Corp 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.