Correlation Between Amazon and Uber Technologies

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

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

Diversification Opportunities for Amazon and Uber Technologies

-0.26

Correlation Coefficient

Amazon  Uber Technologies

Very good diversification

The 3 months correlation between Amazon and Uber is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Uber Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Uber Technologies 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 Uber Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Uber Technologies has no effect on the direction of Amazon i.e., Amazon and Uber Technologies go up and down completely randomly.

Pair Corralation between Amazon and Uber Technologies

Assuming the 90 days horizon Amazon Inc is expected to generate 0.61 times more return on investment than Uber Technologies. However, Amazon Inc is 1.64 times less risky than Uber Technologies. It trades about 0.24 of its potential returns per unit of risk. Uber Technologies is currently generating about 0.0 per unit of risk. If you would invest  16,900  in Amazon Inc on September 12, 2024 and sell it today you would earn a total of  4,575  from holding Amazon Inc or generate 27.07% return on investment over 90 days.

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

Amazon Inc  vs.  Uber Technologies

Amazon Inc

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Amazon reported solid returns over the last few months and may actually be approaching a breakup point.

Uber Technologies

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Uber Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Uber Technologies is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Amazon and Uber Technologies

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

The idea behind Amazon Inc and Uber Technologies 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.