Correlation Between Guangdong Investment and Amazon

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

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

Diversification Opportunities for Guangdong Investment and Amazon

0.58

Correlation Coefficient

Guangdong Investment  Amazon

Very weak diversification

The 3 months correlation between Guangdong and Amazon is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Investment Limited and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc and Guangdong Investment 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 Guangdong Investment Limited 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 Guangdong Investment i.e., Guangdong Investment and Amazon go up and down completely randomly.

Pair Corralation between Guangdong Investment and Amazon

Assuming the 90 days horizon Guangdong Investment is expected to generate 1.82 times less return on investment than Amazon. In addition to that, Guangdong Investment is 1.08 times more volatile than Amazon Inc. It trades about 0.1 of its total potential returns per unit of risk. Amazon Inc is currently generating about 0.21 per unit of volatility. If you would invest  15,074  in Amazon Inc on April 22, 2025 and sell it today you would earn a total of  4,362  from holding Amazon Inc or generate 28.94% return on investment over 90 days.

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

Guangdong Investment Limited  vs.  Amazon Inc

Guangdong Investment

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Investment Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Guangdong Investment reported solid returns over the last few months and may actually be approaching a breakup point.

Amazon Inc

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Amazon displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Guangdong Investment and Amazon

The main advantage of trading using opposite Guangdong Investment and Amazon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guangdong Investment 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 Guangdong Investment Limited 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.