Correlation Between Archer Aviation and Amazon

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Can any of the company-specific risk be diversified away by investing in both Archer Aviation 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 Archer Aviation and Amazon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Archer Aviation and Amazon Inc, you can compare the effects of market volatilities on Archer Aviation 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 Archer Aviation with a short position of Amazon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Archer Aviation and Amazon.

Diversification Opportunities for Archer Aviation and Amazon

0.82
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Archer and Amazon is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Archer Aviation and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc and Archer Aviation 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 Archer Aviation 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 Archer Aviation i.e., Archer Aviation and Amazon go up and down completely randomly.

Pair Corralation between Archer Aviation and Amazon

Given the investment horizon of 90 days Archer Aviation is expected to under-perform the Amazon. In addition to that, Archer Aviation is 1.6 times more volatile than Amazon Inc. It trades about -0.15 of its total potential returns per unit of risk. Amazon Inc is currently generating about 0.02 per unit of volatility. If you would invest  8,998  in Amazon Inc on September 9, 2022 and sell it today you would earn a total of  34.00  from holding Amazon Inc or generate 0.38% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Archer Aviation  vs.  Amazon Inc

 Performance (%) 
       Timeline  
Archer Aviation 
Archer Performance
0 of 100
Over the last 90 days Archer Aviation has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's technical indicators remain relatively invariable which may send shares a bit higher in January 2023. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Archer Price Channel

Amazon Inc 
Amazon Performance
0 of 100
Over the last 90 days Amazon Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2023. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Amazon Price Channel

Archer Aviation and Amazon Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Archer Aviation and Amazon

The main advantage of trading using opposite Archer Aviation and Amazon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Archer Aviation 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.
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The idea behind Archer Aviation 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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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 Transaction History module to view history of all your transactions and understand their impact on performance.

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