Correlation Between Amazon and Permanent Portfolio

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

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

Diversification Opportunities for Amazon and Permanent Portfolio

-0.12

Correlation Coefficient

Amazon  Permanent Portfolio

Good diversification

The 3 months correlation between Amazon and Permanent is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Permanent Portfolio Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Permanent Portfolio Class 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 Permanent Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Permanent Portfolio Class has no effect on the direction of Amazon i.e., Amazon and Permanent Portfolio go up and down completely randomly.

Pair Corralation between Amazon and Permanent Portfolio

Given the investment horizon of 90 days Amazon Inc is expected to under-perform the Permanent Portfolio. In addition to that, Amazon is 2.79 times more volatile than Permanent Portfolio Class. It trades about -0.12 of its total potential returns per unit of risk. Permanent Portfolio Class is currently generating about 0.13 per unit of volatility. If you would invest  5,801  in Permanent Portfolio Class on December 30, 2024 and sell it today you would earn a total of  299.00  from holding Permanent Portfolio Class or generate 5.15% return on investment over 90 days.

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

Amazon Inc  vs.  Permanent Portfolio Class

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.

Permanent Portfolio Class

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Permanent Portfolio Class are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical indicators, Permanent Portfolio 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 Permanent Portfolio

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

The idea behind Amazon Inc and Permanent Portfolio Class 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.