Correlation Between Amazon and Parts ID

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

Diversification Opportunities for Amazon and Parts ID

0.8
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Amazon and Parts is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Parts ID in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parts ID 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 Parts ID. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parts ID has no effect on the direction of Amazon i.e., Amazon and Parts ID go up and down completely randomly.

Pair Corralation between Amazon and Parts ID

Given the investment horizon of 90 days Amazon is expected to generate 1.53 times less return on investment than Parts ID. But when comparing it to its historical volatility, Amazon Inc is 1.88 times less risky than Parts ID. It trades about 0.09 of its potential returns per unit of risk. Parts ID is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  126.00  in Parts ID on March 27, 2022 and sell it today you would earn a total of  7.00  from holding Parts ID or generate 5.56% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy95.24%
ValuesDaily Returns

Amazon Inc  vs.  Parts ID

 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 July 2022. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Structure and Payout Changes

Last Split Factor
20:1
Last Split Date
2022-06-06

Amazon Price Channel

Parts ID 
Parts Performance
0 of 100
Over the last 90 days Parts ID has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in July 2022. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Parts Price Channel

Amazon and Parts ID Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Amazon and Parts ID

The main advantage of trading using opposite Amazon and Parts ID positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Parts ID 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 Parts ID will offset losses from the drop in Parts ID's long position.
The idea behind Amazon Inc and Parts ID 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.
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.

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