Correlation Between Amazon and Insight Select

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

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

Diversification Opportunities for Amazon and Insight Select

-0.32

Correlation Coefficient

Amazon  Insight Select

Very good diversification

The 3 months correlation between Amazon and Insight is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Insight Select Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insight Select Income 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 Insight Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Insight Select Income has no effect on the direction of Amazon i.e., Amazon and Insight Select go up and down completely randomly.

Pair Corralation between Amazon and Insight Select

Given the investment horizon of 90 days Amazon Inc is expected to under-perform the Insight Select. But the stock apears to be less risky and, when comparing its historical volatility, Amazon Inc is 140.65 times less risky than Insight Select. The stock trades about -0.05 of its potential returns per unit of risk. The Insight Select Income is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  13.00  in Insight Select Income on December 2, 2024 and sell it today you would earn a total of  1,610  from holding Insight Select Income or generate 12384.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	50.0%
Values	Daily Returns

Amazon Inc  vs.  Insight Select Income

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.

Insight Select Income

Risk-Adjusted Performance

Solid

Over the last 90 days Insight Select Income has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly fragile basic indicators, Insight Select demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amazon and Insight Select

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

The idea behind Amazon Inc and Insight Select Income 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.