Correlation Between Amazon and Southern BancShares

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

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

Diversification Opportunities for Amazon and Southern BancShares

0.94

Correlation Coefficient

Amazon  Southern BancShares

Almost no diversification

The 3 months correlation between Amazon and Southern is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Southern BancShares NC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern BancShares 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 Southern BancShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern BancShares has no effect on the direction of Amazon i.e., Amazon and Southern BancShares go up and down completely randomly.

Pair Corralation between Amazon and Southern BancShares

Given the investment horizon of 90 days Amazon Inc is expected to generate 0.98 times more return on investment than Southern BancShares. However, Amazon Inc is 1.02 times less risky than Southern BancShares. It trades about 0.1 of its potential returns per unit of risk. Southern BancShares NC is currently generating about 0.08 per unit of risk. If you would invest  9,527  in Amazon Inc on October 3, 2024 and sell it today you would earn a total of  12,603  from holding Amazon Inc or generate 132.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	77.37%
Values	Daily Returns

Amazon Inc  vs.  Southern BancShares NC

Amazon Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 13 (%) 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.

Southern BancShares

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Southern BancShares NC are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Southern BancShares exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amazon and Southern BancShares

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

The idea behind Amazon Inc and Southern BancShares NC 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.