Correlation Between Amazon and Locorr Spectrum

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

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

Diversification Opportunities for Amazon and Locorr Spectrum

0.1

Correlation Coefficient

Amazon  Locorr Spectrum

Average diversification

The 3 months correlation between Amazon and Locorr is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Locorr Spectrum Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Locorr Spectrum 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 Locorr Spectrum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Locorr Spectrum Income has no effect on the direction of Amazon i.e., Amazon and Locorr Spectrum go up and down completely randomly.

Pair Corralation between Amazon and Locorr Spectrum

Given the investment horizon of 90 days Amazon is expected to generate 1.13 times less return on investment than Locorr Spectrum. In addition to that, Amazon is 2.43 times more volatile than Locorr Spectrum Income. It trades about 0.02 of its total potential returns per unit of risk. Locorr Spectrum Income is currently generating about 0.04 per unit of volatility. If you would invest  553.00  in Locorr Spectrum Income on December 2, 2024 and sell it today you would earn a total of  9.00  from holding Locorr Spectrum Income or generate 1.63% return on investment over 90 days.

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

Amazon Inc  vs.  Locorr Spectrum 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.

Locorr Spectrum Income

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Locorr Spectrum Income are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Locorr Spectrum 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 Locorr Spectrum

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

The idea behind Amazon Inc and Locorr Spectrum 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.