Correlation Between Amazon and Aeris Environmental

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

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

Diversification Opportunities for Amazon and Aeris Environmental

0.69

Correlation Coefficient

Amazon  Aeris Environmental

Poor diversification

The 3 months correlation between Amazon and Aeris is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Aeris Environmental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aeris Environmental 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 Aeris Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aeris Environmental has no effect on the direction of Amazon i.e., Amazon and Aeris Environmental go up and down completely randomly.

Pair Corralation between Amazon and Aeris Environmental

Given the investment horizon of 90 days Amazon Inc is expected to generate 0.44 times more return on investment than Aeris Environmental. However, Amazon Inc is 2.29 times less risky than Aeris Environmental. It trades about -0.12 of its potential returns per unit of risk. Aeris Environmental is currently generating about -0.14 per unit of risk. If you would invest  22,130  in Amazon Inc on December 29, 2024 and sell it today you would lose (2,858) from holding Amazon Inc or give up 12.91% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.83%
Values	Daily Returns

Amazon Inc  vs.  Aeris Environmental

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.

Aeris Environmental

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aeris Environmental has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's forward indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Amazon and Aeris Environmental

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

The idea behind Amazon Inc and Aeris Environmental 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.