Correlation Between Amazon and Brainstorm Cell

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

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

Diversification Opportunities for Amazon and Brainstorm Cell

0.38

Correlation Coefficient

Amazon  Brainstorm Cell

Weak diversification

The 3 months correlation between Amazon and Brainstorm is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Brainstorm Cell Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brainstorm Cell Ther 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 Brainstorm Cell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brainstorm Cell Ther has no effect on the direction of Amazon i.e., Amazon and Brainstorm Cell go up and down completely randomly.

Pair Corralation between Amazon and Brainstorm Cell

Given the investment horizon of 90 days Amazon Inc is expected to generate 0.6 times more return on investment than Brainstorm Cell. However, Amazon Inc is 1.66 times less risky than Brainstorm Cell. It trades about -0.32 of its potential returns per unit of risk. Brainstorm Cell Therapeutics is currently generating about -0.21 per unit of risk. If you would invest  23,768  in Amazon Inc on December 2, 2024 and sell it today you would lose (2,540) from holding Amazon Inc or give up 10.69% 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.  Brainstorm Cell Therapeutics

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.

Brainstorm Cell Ther

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Brainstorm Cell Therapeutics are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong essential indicators, Brainstorm Cell is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Amazon and Brainstorm Cell

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

The idea behind Amazon Inc and Brainstorm Cell Therapeutics 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.