Correlation Between Corporate Office and Amazon

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

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

Diversification Opportunities for Corporate Office and Amazon

0.32

Correlation Coefficient

Corporate Office  Amazon

Weak diversification

The 3 months correlation between Corporate and Amazon is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Corporate Office Properties and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc and Corporate Office 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 Corporate Office 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 Corporate Office i.e., Corporate Office and Amazon go up and down completely randomly.

Pair Corralation between Corporate Office and Amazon

Assuming the 90 days horizon Corporate Office is expected to generate 3.89 times less return on investment than Amazon. But when comparing it to its historical volatility, Corporate Office Properties is 1.32 times less risky than Amazon. It trades about 0.03 of its potential returns per unit of risk. Amazon Inc is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  8,846  in Amazon Inc on October 15, 2024 and sell it today you would earn a total of  12,434  from holding Amazon Inc or generate 140.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Corporate Office Properties  vs.  Amazon Inc

Corporate Office Pro

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Corporate Office Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Corporate Office is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the 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. 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 Corporate Office and Amazon

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

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.