Correlation Between Amazon and La-Z-Boy Incorporated

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

Diversification Opportunities for Amazon and La-Z-Boy Incorporated

  Correlation Coefficient

Very good diversification

The 3 months correlation between Amazon and La-Z-Boy is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and La-Z-Boy Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on La-Z-Boy Incorporated 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 La-Z-Boy Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of La-Z-Boy Incorporated has no effect on the direction of Amazon i.e., Amazon and La-Z-Boy Incorporated go up and down completely randomly.

Pair Corralation between Amazon and La-Z-Boy Incorporated

Given the investment horizon of 90 days Amazon Inc is expected to generate 1.08 times more return on investment than La-Z-Boy Incorporated. However, Amazon is 1.08 times more volatile than La-Z-Boy Incorporated. It trades about 0.02 of its potential returns per unit of risk. La-Z-Boy Incorporated is currently generating about -0.01 per unit of risk. If you would invest  9,053  in Amazon Inc on September 6, 2022 and sell it today you would earn a total of  48.00  from holding Amazon Inc or generate 0.53% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
ValuesDaily Returns

Amazon Inc  vs.  La-Z-Boy Incorporated

 Performance (%) 
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

La-Z-Boy Incorporated 
La-Z-Boy Performance
0 of 100
Over the last 90 days La-Z-Boy Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, La-Z-Boy Incorporated is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

La-Z-Boy Price Channel

Amazon and La-Z-Boy Incorporated Volatility Contrast

   Predicted Return Density   

Pair Trading with Amazon and La-Z-Boy Incorporated

The main advantage of trading using opposite Amazon and La-Z-Boy Incorporated positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, La-Z-Boy Incorporated 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 La-Z-Boy Incorporated will offset losses from the drop in La-Z-Boy Incorporated's long position.
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The idea behind Amazon Inc and La-Z-Boy Incorporated 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.

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