Correlation Between Amazon and GraniteShares

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

By analyzing existing cross correlation between Amazon Inc and GraniteShares 3x Long, you can compare the effects of market volatilities on Amazon and GraniteShares 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 GraniteShares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and GraniteShares.

Diversification Opportunities for Amazon and GraniteShares

0.89

Correlation Coefficient

Amazon  GraniteShares

Very poor diversification

The 3 months correlation between Amazon and GraniteShares is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and GraniteShares 3x Long in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GraniteShares 3x Long 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 GraniteShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GraniteShares 3x Long has no effect on the direction of Amazon i.e., Amazon and GraniteShares go up and down completely randomly.

Pair Corralation between Amazon and GraniteShares

Given the investment horizon of 90 days Amazon is expected to generate 3.31 times less return on investment than GraniteShares. But when comparing it to its historical volatility, Amazon Inc is 2.1 times less risky than GraniteShares. It trades about 0.15 of its potential returns per unit of risk. GraniteShares 3x Long is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  6,243  in GraniteShares 3x Long on September 3, 2024 and sell it today you would earn a total of  4,500  from holding GraniteShares 3x Long or generate 72.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.46%
Values	Daily Returns

Amazon Inc  vs.  GraniteShares 3x Long

Amazon Inc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 11 (%) 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.

GraniteShares 3x Long

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GraniteShares 3x Long are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, GraniteShares unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amazon and GraniteShares

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

The idea behind Amazon Inc and GraniteShares 3x Long 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.