Correlation Between Amazon and Avantis International

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

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

Diversification Opportunities for Amazon and Avantis International

0.21

Correlation Coefficient

Amazon  Avantis International

Modest diversification

The 3 months correlation between Amazon and Avantis is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Avantis International Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avantis International 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 Avantis International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avantis International has no effect on the direction of Amazon i.e., Amazon and Avantis International go up and down completely randomly.

Pair Corralation between Amazon and Avantis International

Given the investment horizon of 90 days Amazon is expected to generate 1.96 times less return on investment than Avantis International. In addition to that, Amazon is 2.23 times more volatile than Avantis International Small. It trades about 0.02 of its total potential returns per unit of risk. Avantis International Small is currently generating about 0.07 per unit of volatility. If you would invest  1,241  in Avantis International Small on December 2, 2024 and sell it today you would earn a total of  36.00  from holding Avantis International Small or generate 2.9% return on investment over 90 days.

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

Amazon Inc  vs.  Avantis International Small

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.

Avantis International

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Avantis International Small are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Avantis International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Amazon and Avantis International

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

The idea behind Amazon Inc and Avantis International Small 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.