Correlation Between Amazon and American Leisure

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

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

Diversification Opportunities for Amazon and American Leisure

0.35

Correlation Coefficient

Amazon  American Leisure

Weak diversification

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

Pair Corralation between Amazon and American Leisure

Given the investment horizon of 90 days Amazon Inc is expected to under-perform the American Leisure. But the stock apears to be less risky and, when comparing its historical volatility, Amazon Inc is 16.54 times less risky than American Leisure. The stock trades about -0.12 of its potential returns per unit of risk. The American Leisure Holdings is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  0.02  in American Leisure Holdings on December 29, 2024 and sell it today you would lose (0.01) from holding American Leisure Holdings or give up 50.0% of portfolio value over 90 days.

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

Amazon Inc  vs.  American Leisure Holdings

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.

American Leisure Holdings

Risk-Adjusted Performance

Modest

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

Pair Trading with Amazon and American Leisure

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

The idea behind Amazon Inc and American Leisure Holdings 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.