Correlation Between Amazon and Congress Mid

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Can any of the company-specific risk be diversified away by investing in both Amazon and Congress Mid 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 Congress Mid into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and Congress Mid Cap, you can compare the effects of market volatilities on Amazon and Congress Mid 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 Congress Mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Congress Mid.

Diversification Opportunities for Amazon and Congress Mid

0.86
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Amazon and Congress is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Congress Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Congress Mid Cap 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 Congress Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Congress Mid Cap has no effect on the direction of Amazon i.e., Amazon and Congress Mid go up and down completely randomly.

Pair Corralation between Amazon and Congress Mid

Given the investment horizon of 90 days Amazon Inc is expected to generate 1.87 times more return on investment than Congress Mid. However, Amazon is 1.87 times more volatile than Congress Mid Cap. It trades about 0.22 of its potential returns per unit of risk. Congress Mid Cap is currently generating about 0.16 per unit of risk. If you would invest  17,955  in Amazon Inc on September 10, 2024 and sell it today you would earn a total of  4,748  from holding Amazon Inc or generate 26.44% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Amazon Inc  vs.  Congress Mid Cap

 Performance 
       Timeline  
Amazon Inc 

Risk-Adjusted Performance

17 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 17 (%) 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.
Congress Mid Cap 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Congress Mid Cap are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Congress Mid may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Amazon and Congress Mid Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Amazon and Congress Mid

The main advantage of trading using opposite Amazon and Congress Mid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Congress Mid 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 Congress Mid will offset losses from the drop in Congress Mid's long position.
The idea behind Amazon Inc and Congress Mid Cap 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.
Check out your portfolio center.
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.

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