Correlation Between Amazon and Spectrum Brands

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

Diversification Opportunities for Amazon and Spectrum Brands

  Correlation Coefficient

Modest diversification

The 3 months correlation between Amazon and Spectrum is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Spectrum Brands Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spectrum Brands Holdings 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 Spectrum Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spectrum Brands Holdings has no effect on the direction of Amazon i.e., Amazon and Spectrum Brands go up and down completely randomly.

Pair Corralation between Amazon and Spectrum Brands

Given the investment horizon of 90 days Amazon Inc is expected to under-perform the Spectrum Brands. But the stock apears to be less risky and, when comparing its historical volatility, Amazon Inc is 1.02 times less risky than Spectrum Brands. The stock trades about -0.06 of its potential returns per unit of risk. The Spectrum Brands Holdings is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  9,749  in Spectrum Brands Holdings on September 4, 2022 and sell it today you would lose (3,081)  from holding Spectrum Brands Holdings or give up 31.6% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
ValuesDaily Returns

Amazon Inc  vs.  Spectrum Brands Holdings

 Performance (%) 
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

Spectrum Brands Holdings 
Spectrum Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Spectrum Brands Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Spectrum Brands sustained solid returns over the last few months and may actually be approaching a breakup point.

Spectrum Price Channel

Amazon and Spectrum Brands Volatility Contrast

   Predicted Return Density   

Pair Trading with Amazon and Spectrum Brands

The main advantage of trading using opposite Amazon and Spectrum Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Spectrum Brands 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 Spectrum Brands will offset losses from the drop in Spectrum Brands' long position.
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The idea behind Amazon Inc and Spectrum Brands Holdings 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.

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