Correlation Between Amazon and AAR Corp

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

Diversification Opportunities for Amazon and AAR Corp

-0.31
  Correlation Coefficient

Very good diversification

The 3 months correlation between Amazon and AAR Corp is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and AAR Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AAR Corp 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 AAR Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AAR Corp has no effect on the direction of Amazon i.e., Amazon and AAR Corp go up and down completely randomly.

Pair Corralation between Amazon and AAR Corp

Given the investment horizon of 90 days Amazon Inc is expected to under-perform the AAR Corp. In addition to that, Amazon is 1.99 times more volatile than AAR Corp. It trades about -0.19 of its total potential returns per unit of risk. AAR Corp is currently generating about 0.13 per unit of volatility. If you would invest  4,421  in AAR Corp on August 28, 2022 and sell it today you would earn a total of  234.00  from holding AAR Corp or generate 5.29% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy95.45%
ValuesDaily Returns

Amazon Inc  vs.  AAR Corp

 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

AAR Corp 
AAR Corp Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in AAR Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward indicators, AAR Corp is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

AAR Corp Price Channel

Amazon and AAR Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Amazon and AAR Corp

The main advantage of trading using opposite Amazon and AAR Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, AAR Corp 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 AAR Corp will offset losses from the drop in AAR Corp's long position.
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The idea behind Amazon Inc and AAR Corp 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.

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