Correlation Between Amazon and Verbund AG

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

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

Diversification Opportunities for Amazon and Verbund AG

0.03

Correlation Coefficient

Amazon  Verbund AG

Significant diversification

The 3 months correlation between Amazon and Verbund is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Verbund AG ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verbund AG ADR 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 Verbund AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verbund AG ADR has no effect on the direction of Amazon i.e., Amazon and Verbund AG go up and down completely randomly.

Pair Corralation between Amazon and Verbund AG

Given the investment horizon of 90 days Amazon Inc is expected to under-perform the Verbund AG. But the stock apears to be less risky and, when comparing its historical volatility, Amazon Inc is 1.88 times less risky than Verbund AG. The stock trades about -0.12 of its potential returns per unit of risk. The Verbund AG ADR is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,453  in Verbund AG ADR on December 29, 2024 and sell it today you would earn a total of  32.00  from holding Verbund AG ADR or generate 2.2% 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.  Verbund AG ADR

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.

Verbund AG ADR

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Verbund AG ADR are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Verbund AG 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 Verbund AG

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

The idea behind Amazon Inc and Verbund AG ADR 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.