Correlation Between 1StdibsCom and Amazon

Can any of the company-specific risk be diversified away by investing in both 1StdibsCom 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 1StdibsCom and Amazon into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 1StdibsCom and Amazon Inc, you can compare the effects of market volatilities on 1StdibsCom 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 1StdibsCom with a short position of Amazon. Check out your portfolio center. Please also check ongoing floating volatility patterns of 1StdibsCom and Amazon.

Diversification Opportunities for 1StdibsCom and Amazon

0.59

Correlation Coefficient

1StdibsCom  Amazon

Very weak diversification

The 3 months correlation between 1StdibsCom and Amazon is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding 1StdibsCom and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc and 1StdibsCom 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 1StdibsCom 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 1StdibsCom i.e., 1StdibsCom and Amazon go up and down completely randomly.

Pair Corralation between 1StdibsCom and Amazon

Given the investment horizon of 90 days 1StdibsCom is expected to generate 2.56 times more return on investment than Amazon. However, 1StdibsCom is 2.56 times more volatile than Amazon Inc. It trades about 0.08 of its potential returns per unit of risk. Amazon Inc is currently generating about 0.03 per unit of risk. If you would invest  515.00  in 1StdibsCom on January 30, 2024 and sell it today you would earn a total of  49.00  from holding 1StdibsCom or generate 9.51% return on investment over 90 days.

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

1StdibsCom  vs.  Amazon Inc

1StdibsCom

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in 1StdibsCom are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent fundamental drivers, 1StdibsCom unveiled solid returns over the last few months and may actually be approaching a breakup point.

Amazon Inc

Risk-Adjusted Performance

9 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, Amazon displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with 1StdibsCom and Amazon

The main advantage of trading using opposite 1StdibsCom and Amazon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 1StdibsCom 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 1StdibsCom 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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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.