Correlation Between Amazon and Apple

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

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

Diversification Opportunities for Amazon and Apple

0.91

Correlation Coefficient

Amazon  Apple

Almost no diversification

The 3 months correlation between Amazon and Apple is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Apple Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apple Inc 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 Apple. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apple Inc has no effect on the direction of Amazon i.e., Amazon and Apple go up and down completely randomly.

Pair Corralation between Amazon and Apple

Assuming the 90 days trading horizon Amazon Inc is expected to generate 0.94 times more return on investment than Apple. However, Amazon Inc is 1.06 times less risky than Apple. It trades about -0.07 of its potential returns per unit of risk. Apple Inc is currently generating about -0.08 per unit of risk. If you would invest  21,905  in Amazon Inc on February 17, 2025 and sell it today you would lose (3,533) from holding Amazon Inc or give up 16.13% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Amazon Inc  vs.  Apple Inc

Amazon Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Amazon Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in June 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Apple Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Apple Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in June 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Amazon and Apple

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

The idea behind Amazon Inc and Apple 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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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.