Correlation Between Primary Health and Amazon

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

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

Diversification Opportunities for Primary Health and Amazon

-0.8

Correlation Coefficient

Primary Health  Amazon

Pay attention - limited upside

The 3 months correlation between Primary and Amazon is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Primary Health Properties and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc and Primary Health 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 Primary Health Properties 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 Primary Health i.e., Primary Health and Amazon go up and down completely randomly.

Pair Corralation between Primary Health and Amazon

Assuming the 90 days trading horizon Primary Health Properties is expected to under-perform the Amazon. But the stock apears to be less risky and, when comparing its historical volatility, Primary Health Properties is 1.03 times less risky than Amazon. The stock trades about -0.24 of its potential returns per unit of risk. The Amazon Inc is currently generating about -0.15 of returns per unit of risk over similar time horizon. If you would invest  23,000  in Amazon Inc on October 12, 2024 and sell it today you would lose (750.00) from holding Amazon Inc or give up 3.26% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.0%
Values	Daily Returns

Primary Health Properties  vs.  Amazon Inc

Primary Health Properties

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Primary Health Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Amazon Inc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Amazon unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Primary Health and Amazon

The main advantage of trading using opposite Primary Health and Amazon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Primary Health 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 Primary Health Properties 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.