Correlation Between Amazon and Bright Led

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

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

Diversification Opportunities for Amazon and Bright Led

0.07

Correlation Coefficient

Amazon  Bright Led

Significant diversification

The 3 months correlation between Amazon and Bright is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Bright Led Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bright Led Electronics 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 Bright Led. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bright Led Electronics has no effect on the direction of Amazon i.e., Amazon and Bright Led go up and down completely randomly.

Pair Corralation between Amazon and Bright Led

Given the investment horizon of 90 days Amazon Inc is expected to generate 0.58 times more return on investment than Bright Led. However, Amazon Inc is 1.73 times less risky than Bright Led. It trades about 0.18 of its potential returns per unit of risk. Bright Led Electronics is currently generating about 0.07 per unit of risk. If you would invest  17,333  in Amazon Inc on September 4, 2024 and sell it today you would earn a total of  3,738  from holding Amazon Inc or generate 21.57% return on investment over 90 days.

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

Amazon Inc  vs.  Bright Led Electronics

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

Bright Led Electronics

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bright Led Electronics are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Bright Led showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amazon and Bright Led

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

The idea behind Amazon Inc and Bright Led Electronics 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.