Correlation Between Amazon and Qualcomm Incorporated

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

Diversification Opportunities for Amazon and Qualcomm Incorporated

0.52
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Amazon and Qualcomm is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Qualcomm Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qualcomm Incorporated 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 Qualcomm Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qualcomm Incorporated has no effect on the direction of Amazon i.e., Amazon and Qualcomm Incorporated go up and down completely randomly.

Pair Corralation between Amazon and Qualcomm Incorporated

Given the investment horizon of 90 days Amazon Inc is expected to under-perform the Qualcomm Incorporated. In addition to that, Amazon is 1.05 times more volatile than Qualcomm Incorporated. It trades about -0.11 of its total potential returns per unit of risk. Qualcomm Incorporated is currently generating about 0.08 per unit of volatility. If you would invest  11,647  in Qualcomm Incorporated on September 2, 2022 and sell it today you would earn a total of  1,002  from holding Qualcomm Incorporated or generate 8.6% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Amazon Inc  vs.  Qualcomm Incorporated

 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

Qualcomm Incorporated 
Qualcomm Performance
0 of 100
Over the last 90 days Qualcomm Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady basic indicators, Qualcomm Incorporated is not utilizing all of its potentials. The newest stock price chaos, may contribute to medium-term losses for the stakeholders.

Qualcomm Price Channel

Amazon and Qualcomm Incorporated Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Amazon and Qualcomm Incorporated

The main advantage of trading using opposite Amazon and Qualcomm Incorporated positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Qualcomm Incorporated 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 Qualcomm Incorporated will offset losses from the drop in Qualcomm Incorporated's long position.
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The idea behind Amazon Inc and Qualcomm Incorporated 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.

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