Correlation Between Amazon and Evergreen Steel

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

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

Diversification Opportunities for Amazon and Evergreen Steel

-0.7

Correlation Coefficient

Amazon  Evergreen Steel

Excellent diversification

The 3 months correlation between Amazon and Evergreen is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Evergreen Steel Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evergreen Steel Corp 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 Evergreen Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evergreen Steel Corp has no effect on the direction of Amazon i.e., Amazon and Evergreen Steel go up and down completely randomly.

Pair Corralation between Amazon and Evergreen Steel

Given the investment horizon of 90 days Amazon Inc is expected to generate 1.08 times more return on investment than Evergreen Steel. However, Amazon is 1.08 times more volatile than Evergreen Steel Corp. It trades about 0.23 of its potential returns per unit of risk. Evergreen Steel Corp is currently generating about -0.08 per unit of risk. If you would invest  19,578  in Amazon Inc on September 4, 2024 and sell it today you would earn a total of  1,766  from holding Amazon Inc or generate 9.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Amazon Inc  vs.  Evergreen Steel Corp

Amazon Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Amazon displayed solid returns over the last few months and may actually be approaching a breakup point.

Evergreen Steel Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Evergreen Steel Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Amazon and Evergreen Steel

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

The idea behind Amazon Inc and Evergreen Steel Corp 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.