Correlation Between Amazon and Mospec Semiconductor

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

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

Diversification Opportunities for Amazon and Mospec Semiconductor

-0.55

Correlation Coefficient

Amazon  Mospec Semiconductor

Excellent diversification

The 3 months correlation between Amazon and Mospec is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Mospec Semiconductor Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mospec Semiconductor 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 Mospec Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mospec Semiconductor Corp has no effect on the direction of Amazon i.e., Amazon and Mospec Semiconductor go up and down completely randomly.

Pair Corralation between Amazon and Mospec Semiconductor

Given the investment horizon of 90 days Amazon Inc is expected to generate 1.64 times more return on investment than Mospec Semiconductor. However, Amazon is 1.64 times more volatile than Mospec Semiconductor Corp. It trades about 0.26 of its potential returns per unit of risk. Mospec Semiconductor Corp is currently generating about -0.03 per unit of risk. If you would invest  20,891  in Amazon Inc on September 13, 2024 and sell it today you would earn a total of  2,135  from holding Amazon Inc or generate 10.22% return on investment over 90 days.

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

Amazon Inc  vs.  Mospec Semiconductor Corp

Amazon Inc

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 15 (%) 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.

Mospec Semiconductor Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mospec Semiconductor Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Mospec Semiconductor is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Amazon and Mospec Semiconductor

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

The idea behind Amazon Inc and Mospec Semiconductor 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.