Correlation Between Axon Enterprise and Amazon

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

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

Diversification Opportunities for Axon Enterprise and Amazon

0.83

Correlation Coefficient

Axon Enterprise  Amazon

Very poor diversification

The 3 months correlation between Axon and Amazon is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Axon Enterprise and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc and Axon Enterprise 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 Axon Enterprise 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 Axon Enterprise i.e., Axon Enterprise and Amazon go up and down completely randomly.

Pair Corralation between Axon Enterprise and Amazon

Assuming the 90 days trading horizon Axon Enterprise is expected to generate 1.95 times less return on investment than Amazon. In addition to that, Axon Enterprise is 1.59 times more volatile than Amazon Inc. It trades about 0.14 of its total potential returns per unit of risk. Amazon Inc is currently generating about 0.43 per unit of volatility. If you would invest  20,300  in Amazon Inc on September 19, 2024 and sell it today you would earn a total of  2,850  from holding Amazon Inc or generate 14.04% return on investment over 90 days.

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

Axon Enterprise  vs.  Amazon Inc

Axon Enterprise

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Axon Enterprise are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Axon Enterprise unveiled solid returns over the last few months and may actually be approaching a breakup point.

Amazon Inc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Amazon unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Axon Enterprise and Amazon

The main advantage of trading using opposite Axon Enterprise and Amazon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Axon Enterprise 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 Axon Enterprise 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.