Correlation Between Amazon and Air Products

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

Diversification Opportunities for Amazon and Air Products

  Correlation Coefficient

Excellent diversification

The 3 months correlation between Amazon and Air Products is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Air Products And in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Products And 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 Air Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Products And has no effect on the direction of Amazon i.e., Amazon and Air Products go up and down completely randomly.

Pair Corralation between Amazon and Air Products

Given the investment horizon of 90 days Amazon is expected to generate 2.99 times less return on investment than Air Products. In addition to that, Amazon is 1.96 times more volatile than Air Products And. It trades about 0.09 of its total potential returns per unit of risk. Air Products And is currently generating about 0.52 per unit of volatility. If you would invest  26,402  in Air Products And on September 4, 2022 and sell it today you would earn a total of  5,442  from holding Air Products And or generate 20.61% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
ValuesDaily Returns

Amazon Inc  vs.  Air Products And

 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 conflicting 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

Air Products And 
Air Products Performance
16 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Air Products And are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Air Products exhibited solid returns over the last few months and may actually be approaching a breakup point.

Air Products Price Channel

Amazon and Air Products Volatility Contrast

   Predicted Return Density   

Pair Trading with Amazon and Air Products

The main advantage of trading using opposite Amazon and Air Products positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Air Products 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 Air Products will offset losses from the drop in Air Products' long position.
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The idea behind Amazon Inc and Air Products And 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 Fund Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.

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