Correlation Between Smurfit Kappa and Amazon

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

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

Diversification Opportunities for Smurfit Kappa and Amazon

0.83

Correlation Coefficient

Smurfit Kappa  Amazon

Very poor diversification

The 3 months correlation between Smurfit and Amazon is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Smurfit Kappa Group and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc and Smurfit Kappa 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 Smurfit Kappa Group 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 Smurfit Kappa i.e., Smurfit Kappa and Amazon go up and down completely randomly.

Pair Corralation between Smurfit Kappa and Amazon

Assuming the 90 days horizon Smurfit Kappa Group is expected to generate 2.09 times more return on investment than Amazon. However, Smurfit Kappa is 2.09 times more volatile than Amazon Inc. It trades about -0.02 of its potential returns per unit of risk. Amazon Inc is currently generating about -0.23 per unit of risk. If you would invest  5,080  in Smurfit Kappa Group on October 15, 2024 and sell it today you would lose (40.00) from holding Smurfit Kappa Group or give up 0.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	93.75%
Values	Daily Returns

Smurfit Kappa Group  vs.  Amazon Inc

Smurfit Kappa Group

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Smurfit Kappa Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Smurfit Kappa reported solid returns over the last few months and may actually be approaching a breakup point.

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 comparatively uncertain basic indicators, Amazon unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Smurfit Kappa and Amazon

The main advantage of trading using opposite Smurfit Kappa and Amazon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smurfit Kappa 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 Smurfit Kappa Group 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 Stocks Directory module to find actively traded stocks across global markets.