Correlation Between Amazon and HNR Acquisition

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

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

Diversification Opportunities for Amazon and HNR Acquisition

-0.73

Correlation Coefficient

Amazon  HNR Acquisition

Pay attention - limited upside

The 3 months correlation between Amazon and HNR is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and HNR Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HNR Acquisition Corp 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 HNR Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HNR Acquisition Corp has no effect on the direction of Amazon i.e., Amazon and HNR Acquisition go up and down completely randomly.

Pair Corralation between Amazon and HNR Acquisition

Given the investment horizon of 90 days Amazon Inc is expected to generate 0.21 times more return on investment than HNR Acquisition. However, Amazon Inc is 4.82 times less risky than HNR Acquisition. It trades about 0.16 of its potential returns per unit of risk. HNR Acquisition Corp is currently generating about -0.29 per unit of risk. If you would invest  17,625  in Amazon Inc on October 3, 2024 and sell it today you would earn a total of  4,505  from holding Amazon Inc or generate 25.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	15.48%
Values	Daily Returns

Amazon Inc  vs.  HNR Acquisition Corp

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.

HNR Acquisition Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HNR Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, HNR Acquisition is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Amazon and HNR Acquisition

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

The idea behind Amazon Inc and HNR Acquisition Corp 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.