Correlation Between Amazon and Constellium

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

Diversification Opportunities for Amazon and Constellium

0.5
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Amazon and Constellium is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Constellium SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Constellium SE and Amazon 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 Amazon Inc are associated (or correlated) with Constellium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Constellium SE has no effect on the direction of Amazon i.e., Amazon and Constellium go up and down completely randomly.

Pair Corralation between Amazon and Constellium

Given the investment horizon of 90 days Amazon Inc is expected to under-perform the Constellium. In addition to that, Amazon is 1.14 times more volatile than Constellium SE. It trades about -0.19 of its total potential returns per unit of risk. Constellium SE is currently generating about 0.13 per unit of volatility. If you would invest  1,112  in Constellium SE on August 28, 2022 and sell it today you would earn a total of  99.00  from holding Constellium SE or generate 8.9% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy95.45%
ValuesDaily Returns

Amazon Inc  vs.  Constellium SE

 Performance (%) 
       Timeline  
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 conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in December 2022. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Amazon Price Channel

Constellium SE 
Constellium Performance
0 of 100
Over the last 90 days Constellium SE has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain steady and the new chaos on Wall Street may also be a sign of medium-term gains for the company stakeholders.

Constellium Price Channel

Amazon and Constellium Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Amazon and Constellium

The main advantage of trading using opposite Amazon and Constellium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Constellium 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 Constellium will offset losses from the drop in Constellium's long position.
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The idea behind Amazon Inc and Constellium SE 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 Analyst Recommendations module to analyst recommendations and target price estimates broken down by several categories.

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