Correlation Between Amazon and Reliance Global

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

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

Diversification Opportunities for Amazon and Reliance Global

-0.14

Correlation Coefficient

Amazon  Reliance Global

Good diversification

The 3 months correlation between Amazon and Reliance is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Reliance Global Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reliance Global 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 Reliance Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reliance Global Group has no effect on the direction of Amazon i.e., Amazon and Reliance Global go up and down completely randomly.

Pair Corralation between Amazon and Reliance Global

Given the investment horizon of 90 days Amazon is expected to generate 78.74 times less return on investment than Reliance Global. But when comparing it to its historical volatility, Amazon Inc is 91.39 times less risky than Reliance Global. It trades about 0.18 of its potential returns per unit of risk. Reliance Global Group is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  6.00  in Reliance Global Group on September 4, 2024 and sell it today you would lose (2.15) from holding Reliance Global Group or give up 35.83% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	58.73%
Values	Daily Returns

Amazon Inc  vs.  Reliance Global 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.

Reliance Global Group

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Reliance Global Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly abnormal forward indicators, Reliance Global showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amazon and Reliance Global

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

The idea behind Amazon Inc and Reliance Global 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.