Correlation Between Amazon and DEVRY EDUCATION

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

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

Diversification Opportunities for Amazon and DEVRY EDUCATION

0.93

Correlation Coefficient

Amazon  DEVRY EDUCATION

Almost no diversification

The 3 months correlation between Amazon and DEVRY is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and DEVRY EDUCATION GRP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DEVRY EDUCATION GRP 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 DEVRY EDUCATION. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DEVRY EDUCATION GRP has no effect on the direction of Amazon i.e., Amazon and DEVRY EDUCATION go up and down completely randomly.

Pair Corralation between Amazon and DEVRY EDUCATION

Assuming the 90 days trading horizon Amazon is expected to generate 1.3 times less return on investment than DEVRY EDUCATION. But when comparing it to its historical volatility, Amazon Inc is 1.59 times less risky than DEVRY EDUCATION. It trades about 0.18 of its potential returns per unit of risk. DEVRY EDUCATION GRP is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  6,750  in DEVRY EDUCATION GRP on September 1, 2024 and sell it today you would earn a total of  1,800  from holding DEVRY EDUCATION GRP or generate 26.67% return on investment over 90 days.

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

Amazon Inc  vs.  DEVRY EDUCATION GRP

Amazon Inc

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 14 (%) 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.

DEVRY EDUCATION GRP

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with Amazon and DEVRY EDUCATION

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

The idea behind Amazon Inc and DEVRY EDUCATION GRP 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.