Correlation Between Amazon and Pro Medicus

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

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

Diversification Opportunities for Amazon and Pro Medicus

0.56

Correlation Coefficient

Amazon  Pro Medicus

Very weak diversification

The 3 months correlation between Amazon and Pro is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Pro Medicus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pro Medicus 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 Pro Medicus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pro Medicus has no effect on the direction of Amazon i.e., Amazon and Pro Medicus go up and down completely randomly.

Pair Corralation between Amazon and Pro Medicus

Given the investment horizon of 90 days Amazon is expected to generate 1.67 times less return on investment than Pro Medicus. But when comparing it to its historical volatility, Amazon Inc is 1.17 times less risky than Pro Medicus. It trades about 0.1 of its potential returns per unit of risk. Pro Medicus is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  6,075  in Pro Medicus on December 2, 2024 and sell it today you would earn a total of  19,250  from holding Pro Medicus or generate 316.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.0%
Values	Daily Returns

Amazon Inc  vs.  Pro Medicus

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.

Pro Medicus

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pro Medicus are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Pro Medicus is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Amazon and Pro Medicus

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

The idea behind Amazon Inc and Pro Medicus 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.