Correlation Between Amazon and PHI

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

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

Diversification Opportunities for Amazon and PHI

-0.4

Correlation Coefficient

Amazon  PHI

Very good diversification

The 3 months correlation between Amazon and PHI is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and PHI Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PHI Group 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 PHI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PHI Group has no effect on the direction of Amazon i.e., Amazon and PHI go up and down completely randomly.

Pair Corralation between Amazon and PHI

Given the investment horizon of 90 days Amazon is expected to generate 20.55 times less return on investment than PHI. But when comparing it to its historical volatility, Amazon Inc is 22.62 times less risky than PHI. It trades about 0.18 of its potential returns per unit of risk. PHI Group is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  0.03  in PHI Group on September 12, 2024 and sell it today you would earn a total of  0.00  from holding PHI Group or generate 0.0% return on investment over 90 days.

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

Amazon Inc  vs.  PHI Group

Amazon Inc

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Amazon displayed solid returns over the last few months and may actually be approaching a breakup point.

PHI Group

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PHI Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward indicators, PHI disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amazon and PHI

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

The idea behind Amazon Inc and PHI Group 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.