Correlation Between Amazon and Aehr Test

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

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

Diversification Opportunities for Amazon and Aehr Test

-0.35

Correlation Coefficient

Amazon  Aehr Test

Very good diversification

The 3 months correlation between Amazon and Aehr is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Aehr Test Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aehr Test Systems 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 Aehr Test. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aehr Test Systems has no effect on the direction of Amazon i.e., Amazon and Aehr Test go up and down completely randomly.

Pair Corralation between Amazon and Aehr Test

Given the investment horizon of 90 days Amazon Inc is expected to generate 0.36 times more return on investment than Aehr Test. However, Amazon Inc is 2.78 times less risky than Aehr Test. It trades about 0.13 of its potential returns per unit of risk. Aehr Test Systems is currently generating about -0.06 per unit of risk. If you would invest  17,850  in Amazon Inc on August 30, 2024 and sell it today you would earn a total of  2,724  from holding Amazon Inc or generate 15.26% return on investment over 90 days.

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

Amazon Inc  vs.  Aehr Test Systems

Amazon Inc

Risk-Adjusted Performance

10 of 100

OK

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 unsteady basic indicators, Amazon displayed solid returns over the last few months and may actually be approaching a breakup point.

Aehr Test Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aehr Test Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's technical indicators remain relatively invariable which may send shares a bit higher in December 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Amazon and Aehr Test

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

The idea behind Amazon Inc and Aehr Test Systems 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.