Correlation Between Amazon and Sprott Physical

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

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

Diversification Opportunities for Amazon and Sprott Physical

0.71

Correlation Coefficient

Amazon  Sprott Physical

Poor diversification

The 3 months correlation between Amazon and Sprott is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Sprott Physical Uranium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprott Physical Uranium 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 Sprott Physical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprott Physical Uranium has no effect on the direction of Amazon i.e., Amazon and Sprott Physical go up and down completely randomly.

Pair Corralation between Amazon and Sprott Physical

Given the investment horizon of 90 days Amazon Inc is expected to under-perform the Sprott Physical. But the stock apears to be less risky and, when comparing its historical volatility, Amazon Inc is 1.44 times less risky than Sprott Physical. The stock trades about -0.12 of its potential returns per unit of risk. The Sprott Physical Uranium is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  1,638  in Sprott Physical Uranium on December 29, 2024 and sell it today you would lose (208.00) from holding Sprott Physical Uranium or give up 12.7% of portfolio value over 90 days.

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

Amazon Inc  vs.  Sprott Physical Uranium

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.

Sprott Physical Uranium

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sprott Physical Uranium has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Amazon and Sprott Physical

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

The idea behind Amazon Inc and Sprott Physical Uranium 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.