Correlation Between Southwestern Energy and Amazon

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

Diversification Opportunities for Southwestern Energy and Amazon

0.45
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Southwestern and Amazon is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Southwestern Energy and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc and Southwestern Energy 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 Southwestern Energy 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 Southwestern Energy i.e., Southwestern Energy and Amazon go up and down completely randomly.

Pair Corralation between Southwestern Energy and Amazon

Considering the 90-day investment horizon Southwestern Energy is expected to generate 1.64 times more return on investment than Amazon. However, Southwestern Energy is 1.64 times more volatile than Amazon Inc. It trades about 0.06 of its potential returns per unit of risk. Amazon Inc is currently generating about -0.03 per unit of risk. If you would invest  330.00  in Southwestern Energy on August 29, 2022 and sell it today you would earn a total of  386.00  from holding Southwestern Energy or generate 116.97% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Southwestern Energy  vs.  Amazon Inc

 Performance (%) 
       Timeline  
Southwestern Energy 
Southwestern Performance
0 of 100
Over the last 90 days Southwestern Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Southwestern Energy is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

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

Amazon Price Channel

Southwestern Energy and Amazon Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Southwestern Energy and Amazon

The main advantage of trading using opposite Southwestern Energy and Amazon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwestern Energy 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 Southwestern Energy 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 Analyst Recommendations module to analyst recommendations and target price estimates broken down by several categories.

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