Correlation Between Amazon and Industria

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

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

Diversification Opportunities for Amazon and Industria

-0.59

Correlation Coefficient

Amazon  Industria

Excellent diversification

The 3 months correlation between Amazon and Industria is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Industria de Diseno in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industria de Diseno 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 Industria. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industria de Diseno has no effect on the direction of Amazon i.e., Amazon and Industria go up and down completely randomly.

Pair Corralation between Amazon and Industria

Given the investment horizon of 90 days Amazon Inc is expected to generate 0.87 times more return on investment than Industria. However, Amazon Inc is 1.15 times less risky than Industria. It trades about 0.31 of its potential returns per unit of risk. Industria de Diseno is currently generating about -0.15 per unit of risk. If you would invest  20,145  in Amazon Inc on September 24, 2024 and sell it today you would earn a total of  2,347  from holding Amazon Inc or generate 11.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Amazon Inc  vs.  Industria de Diseno

Amazon Inc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 10 (%) 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.

Industria de Diseno

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Industria de Diseno has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Amazon and Industria

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

The idea behind Amazon Inc and Industria de Diseno 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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.