Correlation Between Amazon and BC Bud

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

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

Diversification Opportunities for Amazon and BC Bud

0.71

Correlation Coefficient

Amazon  BC Bud

Poor diversification

The 3 months correlation between Amazon and BCBCF is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and The BC Bud in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BC Bud 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 BC Bud. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BC Bud has no effect on the direction of Amazon i.e., Amazon and BC Bud go up and down completely randomly.

Pair Corralation between Amazon and BC Bud

Given the investment horizon of 90 days Amazon is expected to generate 6.3 times less return on investment than BC Bud. But when comparing it to its historical volatility, Amazon Inc is 6.89 times less risky than BC Bud. It trades about 0.02 of its potential returns per unit of risk. The BC Bud is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  5.77  in The BC Bud on December 1, 2024 and sell it today you would lose (1.27) from holding The BC Bud or give up 22.01% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Amazon Inc  vs.  The BC Bud

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.

BC Bud

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The BC Bud are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, BC Bud may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Amazon and BC Bud

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

The idea behind Amazon Inc and The BC Bud 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.