Correlation Between EBay and Amazon

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

Diversification Opportunities for EBay and Amazon

0.92
  Correlation Coefficient

Almost no diversification

The 3 months correlation between EBay and Amazon is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding EBay Inc and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc and EBay 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 EBay 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 EBay i.e., EBay and Amazon go up and down completely randomly.

Pair Corralation between EBay and Amazon

Given the investment horizon of 90 days EBay Inc is expected to generate 0.76 times more return on investment than Amazon. However, EBay Inc is 1.31 times less risky than Amazon. It trades about -0.18 of its potential returns per unit of risk. Amazon Inc is currently generating about -0.26 per unit of risk. If you would invest  5,560  in EBay Inc on February 21, 2022 and sell it today you would lose (1,129)  from holding EBay Inc or give up 20.31% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy97.73%
ValuesDaily Returns

EBay Inc  vs.  Amazon Inc

 Performance (%) 
      Timeline 
EBay Inc 
EBay Performance
0 of 100
Over the last 90 days EBay Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in June 2022. The current disturbance may also be a sign of long term up-swing for the company investors.

EBay 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 unsteady performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in June 2022. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Amazon Price Channel

EBay and Amazon Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with EBay and Amazon

The main advantage of trading using opposite EBay and Amazon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EBay 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 EBay 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 Bond Directory module to find actively traded corporate debentures issued by US companies.

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