Correlation Between Amazon and Medicure

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

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

Diversification Opportunities for Amazon and Medicure

-0.05

Correlation Coefficient

Amazon  Medicure

Good diversification

The 3 months correlation between Amazon and Medicure is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Medicure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medicure 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 Medicure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medicure has no effect on the direction of Amazon i.e., Amazon and Medicure go up and down completely randomly.

Pair Corralation between Amazon and Medicure

Given the investment horizon of 90 days Amazon Inc is expected to under-perform the Medicure. But the stock apears to be less risky and, when comparing its historical volatility, Amazon Inc is 2.64 times less risky than Medicure. The stock trades about -0.12 of its potential returns per unit of risk. The Medicure is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  88.00  in Medicure on December 29, 2024 and sell it today you would lose (9.00) from holding Medicure or give up 10.23% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

Amazon Inc  vs.  Medicure

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 unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Medicure

Risk-Adjusted Performance

Very Weak

Over the last 90 days Medicure has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Medicure 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 Medicure

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

The idea behind Amazon Inc and Medicure 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.