Correlation Between Amazon and Sierra Core

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

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

Diversification Opportunities for Amazon and Sierra Core

0.87

Correlation Coefficient

Amazon  Sierra Core

Very poor diversification

The 3 months correlation between Amazon and Sierra is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Sierra E Retirement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sierra E Retirement 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 Sierra Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sierra E Retirement has no effect on the direction of Amazon i.e., Amazon and Sierra Core go up and down completely randomly.

Pair Corralation between Amazon and Sierra Core

Given the investment horizon of 90 days Amazon Inc is expected to under-perform the Sierra Core. In addition to that, Amazon is 4.15 times more volatile than Sierra E Retirement. It trades about -0.12 of its total potential returns per unit of risk. Sierra E Retirement is currently generating about -0.09 per unit of volatility. If you would invest  2,249  in Sierra E Retirement on December 29, 2024 and sell it today you would lose (53.00) from holding Sierra E Retirement or give up 2.36% of portfolio value over 90 days.

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

Amazon Inc  vs.  Sierra E Retirement

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.

Sierra E Retirement

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sierra E Retirement has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward-looking indicators, Sierra Core 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 Sierra Core

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

The idea behind Amazon Inc and Sierra E Retirement 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.

Check out your portfolio center.

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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.