Correlation Between Amazon and TV Thunder

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

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

Diversification Opportunities for Amazon and TV Thunder

-0.79

Correlation Coefficient

Amazon  TV Thunder

Pay attention - limited upside

The 3 months correlation between Amazon and TVT is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and TV Thunder Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TV Thunder Public 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 TV Thunder. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TV Thunder Public has no effect on the direction of Amazon i.e., Amazon and TV Thunder go up and down completely randomly.

Pair Corralation between Amazon and TV Thunder

Given the investment horizon of 90 days Amazon Inc is expected to generate 0.28 times more return on investment than TV Thunder. However, Amazon Inc is 3.61 times less risky than TV Thunder. It trades about 0.2 of its potential returns per unit of risk. TV Thunder Public is currently generating about -0.05 per unit of risk. If you would invest  18,649  in Amazon Inc on September 13, 2024 and sell it today you would earn a total of  4,377  from holding Amazon Inc or generate 23.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Amazon Inc  vs.  TV Thunder Public

Amazon Inc

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 15 (%) 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.

TV Thunder Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TV Thunder Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Amazon and TV Thunder

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

The idea behind Amazon Inc and TV Thunder Public 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.