Correlation Between Amazon and Sealed Air

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

Diversification Opportunities for Amazon and Sealed Air

0.05
  Correlation Coefficient

Significant diversification

The 3 months correlation between Amazon and Sealed is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Sealed Air in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sealed Air 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 Sealed Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sealed Air has no effect on the direction of Amazon i.e., Amazon and Sealed Air go up and down completely randomly.

Pair Corralation between Amazon and Sealed Air

Given the investment horizon of 90 days Amazon Inc is expected to under-perform the Sealed Air. In addition to that, Amazon is 1.48 times more volatile than Sealed Air. It trades about -0.07 of its total potential returns per unit of risk. Sealed Air is currently generating about -0.03 per unit of volatility. If you would invest  6,428  in Sealed Air on September 8, 2022 and sell it today you would lose (1,152)  from holding Sealed Air or give up 17.92% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Amazon Inc  vs.  Sealed Air

 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 unfluctuating 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

Sealed Air 
Sealed Performance
0 of 100
Over the last 90 days Sealed Air has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Sealed Air is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Sealed Price Channel

Amazon and Sealed Air Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Amazon and Sealed Air

The main advantage of trading using opposite Amazon and Sealed Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Sealed Air 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 Sealed Air will offset losses from the drop in Sealed Air's long position.
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The idea behind Amazon Inc and Sealed Air 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.

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