Correlation Between Amazon and CPU SOFTWAREHOUSE

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

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

Diversification Opportunities for Amazon and CPU SOFTWAREHOUSE

-0.15

Correlation Coefficient

Amazon  CPU SOFTWAREHOUSE

Good diversification

The 3 months correlation between Amazon and CPU is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and CPU SOFTWAREHOUSE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CPU SOFTWAREHOUSE 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 CPU SOFTWAREHOUSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CPU SOFTWAREHOUSE has no effect on the direction of Amazon i.e., Amazon and CPU SOFTWAREHOUSE go up and down completely randomly.

Pair Corralation between Amazon and CPU SOFTWAREHOUSE

Given the investment horizon of 90 days Amazon Inc is expected to under-perform the CPU SOFTWAREHOUSE. But the stock apears to be less risky and, when comparing its historical volatility, Amazon Inc is 4.69 times less risky than CPU SOFTWAREHOUSE. The stock trades about -0.12 of its potential returns per unit of risk. The CPU SOFTWAREHOUSE is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  89.00  in CPU SOFTWAREHOUSE on December 28, 2024 and sell it today you would earn a total of  19.00  from holding CPU SOFTWAREHOUSE or generate 21.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Amazon Inc  vs.  CPU SOFTWAREHOUSE

Amazon Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Amazon Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

CPU SOFTWAREHOUSE

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CPU SOFTWAREHOUSE are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, CPU SOFTWAREHOUSE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amazon and CPU SOFTWAREHOUSE

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

The idea behind Amazon Inc and CPU SOFTWAREHOUSE 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.