Correlation Between Phibro Animal and Amazon

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

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

Diversification Opportunities for Phibro Animal and Amazon

-0.38

Correlation Coefficient

Phibro Animal  Amazon

Very good diversification

The 3 months correlation between Phibro and Amazon is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Phibro Animal Health and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc and Phibro Animal 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 Phibro Animal Health 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 Phibro Animal i.e., Phibro Animal and Amazon go up and down completely randomly.

Pair Corralation between Phibro Animal and Amazon

Assuming the 90 days horizon Phibro Animal Health is expected to under-perform the Amazon. In addition to that, Phibro Animal is 1.78 times more volatile than Amazon Inc. It trades about -0.06 of its total potential returns per unit of risk. Amazon Inc is currently generating about 0.09 per unit of volatility. If you would invest  21,640  in Amazon Inc on October 24, 2024 and sell it today you would earn a total of  360.00  from holding Amazon Inc or generate 1.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.12%
Values	Daily Returns

Phibro Animal Health  vs.  Amazon Inc

Phibro Animal Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Phibro Animal Health has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile 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.

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. Despite nearly unsteady basic indicators, Amazon reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Phibro Animal and Amazon

The main advantage of trading using opposite Phibro Animal and Amazon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Phibro Animal 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 Phibro Animal Health 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.

Check out your portfolio center.

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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.