Correlation Between Amazon and IShares Emerging

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

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

Diversification Opportunities for Amazon and IShares Emerging

0.49

Correlation Coefficient

Amazon  IShares Emerging

Very weak diversification

The 3 months correlation between Amazon and IShares is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and iShares Emerging Asia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Emerging Asia 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 IShares Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Emerging Asia has no effect on the direction of Amazon i.e., Amazon and IShares Emerging go up and down completely randomly.

Pair Corralation between Amazon and IShares Emerging

Given the investment horizon of 90 days Amazon Inc is expected to under-perform the IShares Emerging. In addition to that, Amazon is 8.61 times more volatile than iShares Emerging Asia. It trades about -0.05 of its total potential returns per unit of risk. iShares Emerging Asia is currently generating about -0.02 per unit of volatility. If you would invest  7,721  in iShares Emerging Asia on December 2, 2024 and sell it today you would lose (10.00) from holding iShares Emerging Asia or give up 0.13% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	77.5%
Values	Daily Returns

Amazon Inc  vs.  iShares Emerging Asia

Amazon Inc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Amazon is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

iShares Emerging Asia

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Emerging Asia are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, IShares Emerging is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Amazon and IShares Emerging

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

The idea behind Amazon Inc and iShares Emerging Asia 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.