Correlation Between Amazon and Tastemaker Acquisition

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

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

Diversification Opportunities for Amazon and Tastemaker Acquisition

-0.8

Correlation Coefficient

Amazon  Tastemaker Acquisition

Pay attention - limited upside

The 3 months correlation between Amazon and Tastemaker is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Tastemaker Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tastemaker Acquisition 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 Tastemaker Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tastemaker Acquisition has no effect on the direction of Amazon i.e., Amazon and Tastemaker Acquisition go up and down completely randomly.

Pair Corralation between Amazon and Tastemaker Acquisition

Given the investment horizon of 90 days Amazon is expected to generate 6.53 times less return on investment than Tastemaker Acquisition. But when comparing it to its historical volatility, Amazon Inc is 11.36 times less risky than Tastemaker Acquisition. It trades about 0.09 of its potential returns per unit of risk. Tastemaker Acquisition Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  20.00  in Tastemaker Acquisition Corp on October 22, 2024 and sell it today you would lose (13.80) from holding Tastemaker Acquisition Corp or give up 69.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	19.96%
Values	Daily Returns

Amazon Inc  vs.  Tastemaker Acquisition Corp

Amazon Inc

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 12 (%) 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.

Tastemaker Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tastemaker Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Tastemaker Acquisition is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Amazon and Tastemaker Acquisition

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

The idea behind Amazon Inc and Tastemaker Acquisition Corp 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.