Correlation Between Amazon and Atari SA

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

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

Diversification Opportunities for Amazon and Atari SA

0.26

Correlation Coefficient

Amazon  Atari SA

Modest diversification

The 3 months correlation between Amazon and Atari is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Atari SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atari SA 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 Atari SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atari SA has no effect on the direction of Amazon i.e., Amazon and Atari SA go up and down completely randomly.

Pair Corralation between Amazon and Atari SA

Given the investment horizon of 90 days Amazon Inc is expected to generate 0.49 times more return on investment than Atari SA. However, Amazon Inc is 2.05 times less risky than Atari SA. It trades about 0.1 of its potential returns per unit of risk. Atari SA is currently generating about 0.01 per unit of risk. If you would invest  9,243  in Amazon Inc on December 2, 2024 and sell it today you would earn a total of  11,985  from holding Amazon Inc or generate 129.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.21%
Values	Daily Returns

Amazon Inc  vs.  Atari SA

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.

Atari SA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Atari SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Atari SA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amazon and Atari SA

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

The idea behind Amazon Inc and Atari SA 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.