Correlation Between Amazon and Glencore PLC

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

Diversification Opportunities for Amazon and Glencore PLC

-0.68
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Amazon and Glencore is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Glencore PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Glencore PLC ADR 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 Glencore PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Glencore PLC ADR has no effect on the direction of Amazon i.e., Amazon and Glencore PLC go up and down completely randomly.

Pair Corralation between Amazon and Glencore PLC

Given the investment horizon of 90 days Amazon Inc is expected to under-perform the Glencore PLC. In addition to that, Amazon is 1.1 times more volatile than Glencore PLC ADR. It trades about -0.13 of its total potential returns per unit of risk. Glencore PLC ADR is currently generating about 0.13 per unit of volatility. If you would invest  1,106  in Glencore PLC ADR on September 4, 2022 and sell it today you would earn a total of  252.00  from holding Glencore PLC ADR or generate 22.78% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy98.44%
ValuesDaily Returns

Amazon Inc  vs.  Glencore PLC ADR

 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

Glencore PLC ADR 
Glencore Performance
9 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Glencore PLC ADR are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, Glencore PLC showed solid returns over the last few months and may actually be approaching a breakup point.

Glencore Price Channel

Amazon and Glencore PLC Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Amazon and Glencore PLC

The main advantage of trading using opposite Amazon and Glencore PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Glencore PLC 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 Glencore PLC will offset losses from the drop in Glencore PLC's long position.
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The idea behind Amazon Inc and Glencore PLC ADR 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 Focused Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.

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