Correlation Between Amazon and Archer Aviation

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

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

Diversification Opportunities for Amazon and Archer Aviation

-0.46

Correlation Coefficient

Amazon  Archer Aviation

Very good diversification

The 3 months correlation between Amazon and Archer is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Archer Aviation WT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Archer Aviation WT 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 Archer Aviation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Archer Aviation WT has no effect on the direction of Amazon i.e., Amazon and Archer Aviation go up and down completely randomly.

Pair Corralation between Amazon and Archer Aviation

Given the investment horizon of 90 days Amazon is expected to generate 14.56 times less return on investment than Archer Aviation. But when comparing it to its historical volatility, Amazon Inc is 6.65 times less risky than Archer Aviation. It trades about 0.08 of its potential returns per unit of risk. Archer Aviation WT is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  239.00  in Archer Aviation WT on September 21, 2024 and sell it today you would earn a total of  41.00  from holding Archer Aviation WT or generate 17.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	7.14%
Values	Daily Returns

Amazon Inc  vs.  Archer Aviation WT

Amazon Inc

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Amazon displayed solid returns over the last few months and may actually be approaching a breakup point.

Archer Aviation WT

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Archer Aviation WT are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Archer Aviation unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amazon and Archer Aviation

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

The idea behind Amazon Inc and Archer Aviation WT 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.