Correlation Between Consolidated Communications and Amazon

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

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

Diversification Opportunities for Consolidated Communications and Amazon

0.91

Correlation Coefficient

Consolidated Communications  Amazon

Almost no diversification

The 3 months correlation between Consolidated and Amazon is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Consolidated Communications Ho and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc and Consolidated Communications 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 Consolidated Communications Holdings are associated (or correlated) with Amazon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amazon Inc has no effect on the direction of Consolidated Communications i.e., Consolidated Communications and Amazon go up and down completely randomly.

Pair Corralation between Consolidated Communications and Amazon

Assuming the 90 days horizon Consolidated Communications is expected to generate 3.24 times less return on investment than Amazon. In addition to that, Consolidated Communications is 1.52 times more volatile than Amazon Inc. It trades about 0.02 of its total potential returns per unit of risk. Amazon Inc is currently generating about 0.1 per unit of volatility. If you would invest  9,070  in Amazon Inc on October 4, 2024 and sell it today you would earn a total of  12,360  from holding Amazon Inc or generate 136.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.8%
Values	Daily Returns

Consolidated Communications Ho  vs.  Amazon Inc

Consolidated Communications

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Consolidated Communications Holdings are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Consolidated Communications may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Amazon Inc

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Amazon displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Consolidated Communications and Amazon

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

The idea behind Consolidated Communications Holdings and Amazon 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.