Correlation Between Amazon and Bonava AB

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

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

Diversification Opportunities for Amazon and Bonava AB

-0.41

Correlation Coefficient

Amazon  Bonava AB

Very good diversification

The 3 months correlation between Amazon and Bonava is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Bonava AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bonava AB 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 Bonava AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bonava AB has no effect on the direction of Amazon i.e., Amazon and Bonava AB go up and down completely randomly.

Pair Corralation between Amazon and Bonava AB

Given the investment horizon of 90 days Amazon Inc is expected to generate 0.66 times more return on investment than Bonava AB. However, Amazon Inc is 1.52 times less risky than Bonava AB. It trades about 0.24 of its potential returns per unit of risk. Bonava AB is currently generating about 0.04 per unit of risk. If you would invest  17,540  in Amazon Inc on September 8, 2024 and sell it today you would earn a total of  5,163  from holding Amazon Inc or generate 29.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.48%
Values	Daily Returns

Amazon Inc  vs.  Bonava AB

Amazon Inc

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Amazon displayed solid returns over the last few months and may actually be approaching a breakup point.

Bonava AB

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bonava AB are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Bonava AB is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Amazon and Bonava AB

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

The idea behind Amazon Inc and Bonava AB 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..