Correlation Between Amazon and EGPT

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

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

Diversification Opportunities for Amazon and EGPT

-0.04

Correlation Coefficient

Amazon  EGPT

Good diversification

The 3 months correlation between Amazon and EGPT is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and EGPT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EGPT 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 EGPT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EGPT has no effect on the direction of Amazon i.e., Amazon and EGPT go up and down completely randomly.

Pair Corralation between Amazon and EGPT

Given the investment horizon of 90 days Amazon Inc is expected to generate 0.98 times more return on investment than EGPT. However, Amazon Inc is 1.02 times less risky than EGPT. It trades about 0.04 of its potential returns per unit of risk. EGPT is currently generating about 0.03 per unit of risk. If you would invest  12,479  in Amazon Inc on February 26, 2024 and sell it today you would earn a total of  5,596  from holding Amazon Inc or generate 44.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	91.15%
Values	Daily Returns

Amazon Inc  vs.  EGPT

Amazon Inc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Amazon is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

EGPT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EGPT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Etf's basic indicators remain comparatively stable which may send shares a bit higher in June 2024. The newest uproar may also be a sign of mid-term up-swing for the exchange-traded fund private investors.

Pair Trading with Amazon and EGPT

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

The idea behind Amazon Inc and EGPT 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 Commodity Directory module to find actively traded commodities issued by global exchanges.