Correlation Between Amazon and Velodyne Lidar

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

Diversification Opportunities for Amazon and Velodyne Lidar

  Correlation Coefficient

Very weak diversification

The 3 months correlation between Amazon and Velodyne is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Velodyne Lidar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Velodyne Lidar 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 Velodyne Lidar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Velodyne Lidar has no effect on the direction of Amazon i.e., Amazon and Velodyne Lidar go up and down completely randomly.

Pair Corralation between Amazon and Velodyne Lidar

Given the investment horizon of 90 days Amazon Inc is expected to under-perform the Velodyne Lidar. But the stock apears to be less risky and, when comparing its historical volatility, Amazon Inc is 2.19 times less risky than Velodyne Lidar. The stock trades about -0.02 of its potential returns per unit of risk. The Velodyne Lidar is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  97.00  in Velodyne Lidar on September 8, 2022 and sell it today you would earn a total of  10.00  from holding Velodyne Lidar or generate 10.31% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
ValuesDaily Returns

Amazon Inc  vs.  Velodyne Lidar

 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 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

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

Velodyne Price Channel

Amazon and Velodyne Lidar Volatility Contrast

   Predicted Return Density   

Pair Trading with Amazon and Velodyne Lidar

The main advantage of trading using opposite Amazon and Velodyne Lidar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Velodyne Lidar 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 Velodyne Lidar will offset losses from the drop in Velodyne Lidar's long position.
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The idea behind Amazon Inc and Velodyne Lidar 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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