Correlation Between Chewy and Amazon

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

Diversification Opportunities for Chewy and Amazon

0.62
  Correlation Coefficient

Poor diversification

The 3 months correlation between Chewy and Amazon is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Chewy Inc and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc and Chewy 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 Chewy Inc are associated (or correlated) with Amazon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amazon Inc has no effect on the direction of Chewy i.e., Chewy and Amazon go up and down completely randomly.

Pair Corralation between Chewy and Amazon

Given the investment horizon of 90 days Chewy is expected to generate 1.61 times less return on investment than Amazon. In addition to that, Chewy is 1.2 times more volatile than Amazon Inc. It trades about 0.2 of its total potential returns per unit of risk. Amazon Inc is currently generating about 0.38 per unit of volatility. If you would invest  11,040  in Amazon Inc on May 14, 2022 and sell it today you would earn a total of  3,315  from holding Amazon Inc or generate 30.03% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Chewy Inc  vs.  Amazon Inc

 Performance (%) 
       Timeline  
Chewy Inc 
Chewy Performance
15 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Chewy Inc are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Chewy showed solid returns over the last few months and may actually be approaching a breakup point.

Chewy Price Channel

Amazon Inc 
Amazon Performance
11 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, Amazon disclosed solid returns over the last few months and may actually be approaching a breakup point.

Amazon Price Channel

Chewy and Amazon Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Chewy and Amazon

The main advantage of trading using opposite Chewy and Amazon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chewy position performs unexpectedly, Amazon 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 Amazon will offset losses from the drop in Amazon's long position.
The idea behind Chewy Inc and Amazon Inc 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.
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 Piotroski F Score module to get Piotroski F Score based on binary analysis strategy of nine different fundamentals.

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