Correlation Between Amazon and Agilon Health

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

Diversification Opportunities for Amazon and Agilon Health

0.78
  Correlation Coefficient

Poor diversification

The 3 months correlation between Amazon and Agilon is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Agilon Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agilon Health 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 Agilon Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agilon Health has no effect on the direction of Amazon i.e., Amazon and Agilon Health go up and down completely randomly.

Pair Corralation between Amazon and Agilon Health

Given the investment horizon of 90 days Amazon Inc is expected to generate 0.64 times more return on investment than Agilon Health. However, Amazon Inc is 1.55 times less risky than Agilon Health. It trades about -0.03 of its potential returns per unit of risk. Agilon Health is currently generating about -0.02 per unit of risk. If you would invest  15,790  in Amazon Inc on August 28, 2022 and sell it today you would lose (6,449)  from holding Amazon Inc or give up 40.84% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy82.29%
ValuesDaily Returns

Amazon Inc  vs.  Agilon Health

 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

Agilon Health 
Agilon Performance
0 of 100
Over the last 90 days Agilon Health has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's technical and fundamental indicators remain relatively steady which may send shares a bit higher in December 2022. The new chaos may also be a sign of medium-term up-swing for the company stakeholders.

Agilon Price Channel

Amazon and Agilon Health Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Amazon and Agilon Health

The main advantage of trading using opposite Amazon and Agilon Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Agilon Health 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 Agilon Health will offset losses from the drop in Agilon Health's long position.
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The idea behind Amazon Inc and Agilon Health 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 Watchlist Optimization module to optimize watchlists to build efficient portfolio or rebalance existing positions based on mean-variance optimization algorithm.

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