Correlation Between Amazon and PacifiCorp

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

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

Diversification Opportunities for Amazon and PacifiCorp

0.47

Correlation Coefficient

Amazon  PacifiCorp

Very weak diversification

The 3 months correlation between Amazon and PacifiCorp is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and PacifiCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PacifiCorp 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 PacifiCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PacifiCorp has no effect on the direction of Amazon i.e., Amazon and PacifiCorp go up and down completely randomly.

Pair Corralation between Amazon and PacifiCorp

Given the investment horizon of 90 days Amazon Inc is expected to generate 0.05 times more return on investment than PacifiCorp. However, Amazon Inc is 22.06 times less risky than PacifiCorp. It trades about -0.12 of its potential returns per unit of risk. PacifiCorp is currently generating about -0.17 per unit of risk. If you would invest  22,130  in Amazon Inc on December 30, 2024 and sell it today you would lose (2,858) from holding Amazon Inc or give up 12.91% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	17.74%
Values	Daily Returns

Amazon Inc  vs.  PacifiCorp

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.

PacifiCorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days PacifiCorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's essential 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.

Pair Trading with Amazon and PacifiCorp

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

The idea behind Amazon Inc and PacifiCorp 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.