Correlation Between Amazon and Lyxor Commodities

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

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

Diversification Opportunities for Amazon and Lyxor Commodities

0.5

Correlation Coefficient

Amazon  Lyxor Commodities

Very weak diversification

The 3 months correlation between Amazon and Lyxor is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Lyxor Commodities RefinitivCor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyxor Commodities 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 Lyxor Commodities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lyxor Commodities has no effect on the direction of Amazon i.e., Amazon and Lyxor Commodities go up and down completely randomly.

Pair Corralation between Amazon and Lyxor Commodities

Given the investment horizon of 90 days Amazon Inc is expected to generate 1.89 times more return on investment than Lyxor Commodities. However, Amazon is 1.89 times more volatile than Lyxor Commodities RefinitivCoreCommodity. It trades about 0.18 of its potential returns per unit of risk. Lyxor Commodities RefinitivCoreCommodity is currently generating about 0.16 per unit of risk. If you would invest  17,333  in Amazon Inc on September 4, 2024 and sell it today you would earn a total of  3,738  from holding Amazon Inc or generate 21.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Amazon Inc  vs.  Lyxor Commodities RefinitivCor

Amazon Inc

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 14 (%) 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.

Lyxor Commodities

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor Commodities RefinitivCoreCommodity are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Lyxor Commodities may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Amazon and Lyxor Commodities

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

The idea behind Amazon Inc and Lyxor Commodities RefinitivCoreCommodity 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.