Correlation Between Amazon and Willis Towers

Can any of the company-specific risk be diversified away by investing in both Amazon and Willis Towers 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 Willis Towers into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Amazon Inc and Willis Towers Watson, you can compare the effects of market volatilities on Amazon and Willis Towers 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 Willis Towers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Willis Towers.

Diversification Opportunities for Amazon and Willis Towers

-0.49

Correlation Coefficient

Amazon  Willis Towers

Very good diversification

The 3 months correlation between Amazon and Willis is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Willis Towers Watson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Willis Towers Watson 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 Willis Towers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Willis Towers Watson has no effect on the direction of Amazon i.e., Amazon and Willis Towers go up and down completely randomly.

Pair Corralation between Amazon and Willis Towers

Assuming the 90 days horizon Amazon Inc is expected to generate 1.45 times more return on investment than Willis Towers. However, Amazon is 1.45 times more volatile than Willis Towers Watson. It trades about 0.15 of its potential returns per unit of risk. Willis Towers Watson is currently generating about -0.08 per unit of risk. If you would invest  16,340  in Amazon Inc on April 24, 2025 and sell it today you would earn a total of  3,022  from holding Amazon Inc or generate 18.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Amazon Inc  vs.  Willis Towers Watson

Amazon Inc

Risk-Adjusted Performance

Good

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 nearly fragile basic indicators, Amazon reported solid returns over the last few months and may actually be approaching a breakup point.

Willis Towers Watson

Risk-Adjusted Performance

Very Weak

Over the last 90 days Willis Towers Watson has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Amazon and Willis Towers

The main advantage of trading using opposite Amazon and Willis Towers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Willis Towers 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 Willis Towers will offset losses from the drop in Willis Towers' long position.

The idea behind Amazon Inc and Willis Towers Watson 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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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 the Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.