Correlation Between Amazon and Foreign Trade

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

Diversification Opportunities for Amazon and Foreign Trade

-0.67
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Amazon and Foreign is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Foreign Trade Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Foreign Trade Bank 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 Foreign Trade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Foreign Trade Bank has no effect on the direction of Amazon i.e., Amazon and Foreign Trade go up and down completely randomly.

Pair Corralation between Amazon and Foreign Trade

Given the investment horizon of 90 days Amazon Inc is expected to under-perform the Foreign Trade. In addition to that, Amazon is 1.99 times more volatile than Foreign Trade Bank. It trades about -0.16 of its total potential returns per unit of risk. Foreign Trade Bank is currently generating about 0.21 per unit of volatility. If you would invest  1,401  in Foreign Trade Bank on September 4, 2022 and sell it today you would earn a total of  227.00  from holding Foreign Trade Bank or generate 16.2% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Amazon Inc  vs.  Foreign Trade Bank

 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 January 2023. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Amazon Price Channel

Foreign Trade Bank 
Foreign Performance
8 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Foreign Trade Bank are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Foreign Trade showed solid returns over the last few months and may actually be approaching a breakup point.

Foreign Price Channel

Amazon and Foreign Trade Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Amazon and Foreign Trade

The main advantage of trading using opposite Amazon and Foreign Trade positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Foreign Trade 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 Foreign Trade will offset losses from the drop in Foreign Trade's long position.
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The idea behind Amazon Inc and Foreign Trade Bank 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.

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