Correlation Between Carvana and Amazon

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

Diversification Opportunities for Carvana and Amazon

0.9
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Carvana and Amazon is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Carvana Co and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc and Carvana 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 Carvana Co 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 Carvana i.e., Carvana and Amazon go up and down completely randomly.

Pair Corralation between Carvana and Amazon

Given the investment horizon of 90 days Carvana Co is expected to under-perform the Amazon. In addition to that, Carvana is 2.78 times more volatile than Amazon Inc. It trades about -0.07 of its total potential returns per unit of risk. Amazon Inc is currently generating about -0.04 per unit of volatility. If you would invest  16,180  in Amazon Inc on September 8, 2022 and sell it today you would lose (7,307)  from holding Amazon Inc or give up 45.16% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy99.8%
ValuesDaily Returns

Carvana Co  vs.  Amazon Inc

 Performance (%) 
       Timeline  
Carvana 
Carvana Performance
0 of 100
Over the last 90 days Carvana Co 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 somewhat strong which may send shares a bit higher in January 2023. The current disturbance may also be a sign of long term up-swing for the company investors.

Carvana Price Channel

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

Carvana and Amazon Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Carvana and Amazon

The main advantage of trading using opposite Carvana and Amazon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carvana 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.
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The idea behind Carvana Co 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.
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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.

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