Correlation Between Amazon and Euro Tech

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

Diversification Opportunities for Amazon and Euro Tech

-0.07
  Correlation Coefficient

Good diversification

The 3 months correlation between Amazon and Euro Tech is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Euro Tech Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Euro Tech Holdings 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 Euro Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Euro Tech Holdings has no effect on the direction of Amazon i.e., Amazon and Euro Tech go up and down completely randomly.

Pair Corralation between Amazon and Euro Tech

Given the investment horizon of 90 days Amazon Inc is expected to under-perform the Euro Tech. But the stock apears to be less risky and, when comparing its historical volatility, Amazon Inc is 1.03 times less risky than Euro Tech. The stock trades about -0.11 of its potential returns per unit of risk. The Euro Tech Holdings is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  123.00  in Euro Tech Holdings on September 2, 2022 and sell it today you would earn a total of  25.00  from holding Euro Tech Holdings or generate 20.33% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Amazon Inc  vs.  Euro Tech Holdings

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

Amazon Price Channel

Euro Tech Holdings 
Euro Tech Performance
0 of 100
Over the last 90 days Euro Tech Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Euro Tech is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Euro Tech Price Channel

Amazon and Euro Tech Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Amazon and Euro Tech

The main advantage of trading using opposite Amazon and Euro Tech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Euro Tech 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 Euro Tech will offset losses from the drop in Euro Tech's long position.
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The idea behind Amazon Inc and Euro Tech Holdings 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.

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