Correlation Between Amazon and Beyond Meat

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

Diversification Opportunities for Amazon and Beyond Meat

0.69
  Correlation Coefficient

Poor diversification

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

Pair Corralation between Amazon and Beyond Meat

Given the investment horizon of 90 days Amazon Inc is expected to generate 0.5 times more return on investment than Beyond Meat. However, Amazon Inc is 1.99 times less risky than Beyond Meat. It trades about -0.04 of its potential returns per unit of risk. Beyond Meat is currently generating about -0.07 per unit of risk. If you would invest  16,180  in Amazon Inc on September 8, 2022 and sell it today you would lose (7,334)  from holding Amazon Inc or give up 45.33% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Amazon Inc  vs.  Beyond Meat

 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 unfluctuating 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

Beyond Meat 
Beyond Performance
0 of 100
Over the last 90 days Beyond Meat has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2023. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Beyond Price Channel

Amazon and Beyond Meat Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Amazon and Beyond Meat

The main advantage of trading using opposite Amazon and Beyond Meat positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Beyond Meat 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 Beyond Meat will offset losses from the drop in Beyond Meat's long position.
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The idea behind Amazon Inc and Beyond Meat 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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