Correlation Between Amazon and ZALANDO SE

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

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

Diversification Opportunities for Amazon and ZALANDO SE

0.74

Correlation Coefficient

Amazon  ZALANDO SE

Poor diversification

The 3 months correlation between Amazon and ZALANDO is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and ZALANDO SE ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZALANDO SE ADR 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 ZALANDO SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZALANDO SE ADR has no effect on the direction of Amazon i.e., Amazon and ZALANDO SE go up and down completely randomly.

Pair Corralation between Amazon and ZALANDO SE

Given the investment horizon of 90 days Amazon Inc is expected to generate 0.95 times more return on investment than ZALANDO SE. However, Amazon Inc is 1.06 times less risky than ZALANDO SE. It trades about 0.02 of its potential returns per unit of risk. ZALANDO SE ADR is currently generating about -0.24 per unit of risk. If you would invest  18,519  in Amazon Inc on February 6, 2024 and sell it today you would earn a total of  102.00  from holding Amazon Inc or generate 0.55% return on investment over 90 days.

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

Amazon Inc  vs.  ZALANDO SE ADR

Amazon Inc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Amazon may actually be approaching a critical reversion point that can send shares even higher in June 2024.

ZALANDO SE ADR

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ZALANDO SE ADR are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain fundamental indicators, ZALANDO SE showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amazon and ZALANDO SE

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

The idea behind Amazon Inc and ZALANDO SE ADR 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.