Correlation Between Amazon and Zedge

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

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

Diversification Opportunities for Amazon and Zedge

0.81

Correlation Coefficient

Amazon  Zedge

Very poor diversification

The 3 months correlation between Amazon and Zedge is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Zedge Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zedge Inc 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 Zedge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zedge Inc has no effect on the direction of Amazon i.e., Amazon and Zedge go up and down completely randomly.

Pair Corralation between Amazon and Zedge

Given the investment horizon of 90 days Amazon Inc is expected to generate 0.53 times more return on investment than Zedge. However, Amazon Inc is 1.9 times less risky than Zedge. It trades about -0.08 of its potential returns per unit of risk. Zedge Inc is currently generating about -0.07 per unit of risk. If you would invest  22,130  in Amazon Inc on December 28, 2024 and sell it today you would lose (2,017) from holding Amazon Inc or give up 9.11% 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.  Zedge Inc

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 latest unsteady performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Zedge Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Zedge Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Amazon and Zedge

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

The idea behind Amazon Inc and Zedge Inc 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.