Correlation Between AeroVironment and Amazon

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

Diversification Opportunities for AeroVironment and Amazon

  Correlation Coefficient

Significant diversification

The 3 months correlation between AeroVironment and Amazon is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding AeroVironment and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc and AeroVironment 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 AeroVironment 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 AeroVironment i.e., AeroVironment and Amazon go up and down completely randomly.

Pair Corralation between AeroVironment and Amazon

Given the investment horizon of 90 days AeroVironment is expected to generate 1.1 times more return on investment than Amazon. However, AeroVironment is 1.1 times more volatile than Amazon Inc. It trades about 0.07 of its potential returns per unit of risk. Amazon Inc is currently generating about 0.02 per unit of risk. If you would invest  8,512  in AeroVironment on September 6, 2022 and sell it today you would earn a total of  359.00  from holding AeroVironment or generate 4.22% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
ValuesDaily Returns

AeroVironment  vs.  Amazon Inc

 Performance (%) 
AeroVironment Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in AeroVironment are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, AeroVironment is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

AeroVironment 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 unsteady 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

AeroVironment and Amazon Volatility Contrast

   Predicted Return Density   

Pair Trading with AeroVironment and Amazon

The main advantage of trading using opposite AeroVironment and Amazon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AeroVironment 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 AeroVironment 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.

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