Correlation Between Amazon and Applied Blockchain

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

Diversification Opportunities for Amazon and Applied Blockchain

-0.29
  Correlation Coefficient

Very good diversification

The 3 months correlation between Amazon and Applied is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Applied Blockchain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Blockchain 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 Applied Blockchain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Blockchain has no effect on the direction of Amazon i.e., Amazon and Applied Blockchain go up and down completely randomly.

Pair Corralation between Amazon and Applied Blockchain

Given the investment horizon of 90 days Amazon Inc is expected to generate 0.59 times more return on investment than Applied Blockchain. However, Amazon Inc is 1.7 times less risky than Applied Blockchain. It trades about -0.05 of its potential returns per unit of risk. Applied Blockchain is currently generating about -0.07 per unit of risk. If you would invest  10,244  in Amazon Inc on September 1, 2022 and sell it today you would lose (590.00)  from holding Amazon Inc or give up 5.76% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Amazon Inc  vs.  Applied Blockchain

 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 weak 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

Applied Blockchain 
Applied Performance
0 of 100
Over the last 90 days Applied Blockchain has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, Applied Blockchain is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Applied Price Channel

Amazon and Applied Blockchain Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Amazon and Applied Blockchain

The main advantage of trading using opposite Amazon and Applied Blockchain positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Applied Blockchain 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 Applied Blockchain will offset losses from the drop in Applied Blockchain's long position.
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The idea behind Amazon Inc and Applied Blockchain 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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