Correlation Between Amazon and United Parcel

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

Diversification Opportunities for Amazon and United Parcel

0.27
  Correlation Coefficient

Modest diversification

The 3 months correlation between Amazon and United is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and United Parcel Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Parcel Service 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 United Parcel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Parcel Service has no effect on the direction of Amazon i.e., Amazon and United Parcel go up and down completely randomly.

Pair Corralation between Amazon and United Parcel

Given the investment horizon of 90 days Amazon Inc is expected to under-perform the United Parcel. In addition to that, Amazon is 1.59 times more volatile than United Parcel Service. It trades about -0.13 of its total potential returns per unit of risk. United Parcel Service is currently generating about -0.01 per unit of volatility. If you would invest  19,423  in United Parcel Service on September 3, 2022 and sell it today you would lose (484.00)  from holding United Parcel Service or give up 2.49% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Amazon Inc  vs.  United Parcel Service

 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

United Parcel Service 
United Performance
0 of 100
Over the last 90 days United Parcel Service has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, United Parcel is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

United Price Channel

Amazon and United Parcel Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Amazon and United Parcel

The main advantage of trading using opposite Amazon and United Parcel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, United Parcel 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 United Parcel will offset losses from the drop in United Parcel's long position.
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The idea behind Amazon Inc and United Parcel Service 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.

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