Correlation Between Amazon and MITIE GROUP

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

Diversification Opportunities for Amazon and MITIE GROUP

0.87
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Amazon and MITIE is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and MITIE GROUP PLC ORD 2 5P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MITIE GROUP PLC 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 MITIE GROUP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MITIE GROUP PLC has no effect on the direction of Amazon i.e., Amazon and MITIE GROUP go up and down completely randomly.

Pair Corralation between Amazon and MITIE GROUP

Given the investment horizon of 90 days Amazon Inc is expected to generate 0.96 times more return on investment than MITIE GROUP. However, Amazon Inc is 1.04 times less risky than MITIE GROUP. It trades about -0.15 of its potential returns per unit of risk. MITIE GROUP PLC is currently generating about -0.22 per unit of risk. If you would invest  12,611  in Amazon Inc on July 6, 2022 and sell it today you would lose (1,023)  from holding Amazon Inc or give up 8.11% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Amazon Inc  vs.  MITIE GROUP PLC ORD 2 5P

 Performance (%) 
       Timeline  
Amazon Inc 
Amazon Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Amazon is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Amazon Price Channel

MITIE GROUP PLC 
MITIE Performance
7 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in MITIE GROUP PLC are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively sluggish basic indicators, MITIE GROUP revealed solid returns over the last few months and may actually be approaching a breakup point.

MITIE Price Channel

Amazon and MITIE GROUP Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Amazon and MITIE GROUP

The main advantage of trading using opposite Amazon and MITIE GROUP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, MITIE GROUP 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 MITIE GROUP will offset losses from the drop in MITIE GROUP's long position.
The idea behind Amazon Inc and MITIE GROUP PLC 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.
MITIE GROUP vs. GLAXOSMITHKLINE PLC ORD
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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