Correlation Between Amazon and Joby Aviation

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

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

Diversification Opportunities for Amazon and Joby Aviation

0.37

Correlation Coefficient

Amazon  Joby Aviation

Weak diversification

The 3 months correlation between Amazon and Joby is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Joby Aviation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Joby Aviation 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 Joby Aviation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Joby Aviation has no effect on the direction of Amazon i.e., Amazon and Joby Aviation go up and down completely randomly.

Pair Corralation between Amazon and Joby Aviation

Given the investment horizon of 90 days Amazon Inc is expected to generate 0.24 times more return on investment than Joby Aviation. However, Amazon Inc is 4.1 times less risky than Joby Aviation. It trades about -0.33 of its potential returns per unit of risk. Joby Aviation is currently generating about -0.35 per unit of risk. If you would invest  23,742  in Amazon Inc on December 4, 2024 and sell it today you would lose (2,514) from holding Amazon Inc or give up 10.59% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Amazon Inc  vs.  Joby Aviation

Amazon Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Amazon Inc has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Joby Aviation

Risk-Adjusted Performance

Very Weak

Over the last 90 days Joby Aviation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Amazon and Joby Aviation

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

The idea behind Amazon Inc and Joby Aviation 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.