Correlation Between Amazon and Hoteles Bestprice

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

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

Diversification Opportunities for Amazon and Hoteles Bestprice

-0.24

Correlation Coefficient

Amazon  Hoteles Bestprice

Very good diversification

The 3 months correlation between Amazon and Hoteles is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Hoteles Bestprice SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hoteles Bestprice 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 Hoteles Bestprice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hoteles Bestprice has no effect on the direction of Amazon i.e., Amazon and Hoteles Bestprice go up and down completely randomly.

Pair Corralation between Amazon and Hoteles Bestprice

Given the investment horizon of 90 days Amazon Inc is expected to under-perform the Hoteles Bestprice. But the stock apears to be less risky and, when comparing its historical volatility, Amazon Inc is 1.11 times less risky than Hoteles Bestprice. The stock trades about -0.05 of its potential returns per unit of risk. The Hoteles Bestprice SA is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  300.00  in Hoteles Bestprice SA on December 2, 2024 and sell it today you would earn a total of  50.00  from holding Hoteles Bestprice SA or generate 16.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.02%
Values	Daily Returns

Amazon Inc  vs.  Hoteles Bestprice SA

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.

Hoteles Bestprice

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hoteles Bestprice SA are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Hoteles Bestprice reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amazon and Hoteles Bestprice

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

The idea behind Amazon Inc and Hoteles Bestprice SA 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.