Correlation Between Amazon and Primary Health

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

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

Diversification Opportunities for Amazon and Primary Health

-0.81

Correlation Coefficient

Amazon  Primary Health

Pay attention - limited upside

The 3 months correlation between Amazon and Primary is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Primary Health Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Primary Health Properties 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 Primary Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Primary Health Properties has no effect on the direction of Amazon i.e., Amazon and Primary Health go up and down completely randomly.

Pair Corralation between Amazon and Primary Health

Assuming the 90 days trading horizon Amazon Inc is expected to generate 1.89 times more return on investment than Primary Health. However, Amazon is 1.89 times more volatile than Primary Health Properties. It trades about 0.08 of its potential returns per unit of risk. Primary Health Properties is currently generating about -0.01 per unit of risk. If you would invest  15,325  in Amazon Inc on September 24, 2024 and sell it today you would earn a total of  7,225  from holding Amazon Inc or generate 47.15% return on investment over 90 days.

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

Amazon Inc  vs.  Primary Health Properties

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 comparatively unsteady basic indicators, Amazon unveiled solid returns over the last few months and may actually be approaching a breakup point.

Primary Health Properties

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Primary Health Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Amazon and Primary Health

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

The idea behind Amazon Inc and Primary Health Properties 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.